Biden the Oil Baron, Endless Shrimp ends Red Lobster, ticketing Ticketmaster and CENTS.

Hi Folks and welcome to the 3^RD Edition of Friday Finance Weekly.  I am traveling so this may not be the usual flavour. Let’s dive right into things. Interesting week overall with Canadian inflation continuing to come down so hopefully there is a rate cut.

Joe Biden is a lot of things, but did you know his oil trading strategy would have even left Enron energy traders amazed? (yes he would have even beaten their fake returns). 

• Two years ago, the Biden administration initiated the largest ever sell-off from America’s Strategic Petroleum Reserve. To counteract surging prices caused by Russia’s war in Ukraine, the government released 180 million barrels of crude at $95 a barrel.

• In July 2023, when the WTI benchmark was at $67 a barrel, Biden seized the opportunity to begin refilling America’s crude reserves, turning a $582 million profit in the process.

• Treasury officials estimate the sale knocked approximately $0.40 off the price per gallon at the pump – a win for consumers at the expense of producers. 

• When the president sold reserves, he promised two things: (1) to buy back barrels if prices fell to $67-$72, and (2) to rewrite rules to allow the government to offer producers forward contracts at fixed prices. 

• His logic for doing so was to reduce the risk of prices falling, which would spur domestic investment in new production – thereby pulling prices into his target range.

• Over the following months, planned investment more than tripled despite falling prices at the time.

Well, that proves it – he’s not as senile as he looks. Now, if only he could walk up stairs without tripping, it might convince MAGA worshipers to change their faith. (Source: Economist)

If you’ve enjoyed endless shrimp specials from Reb Lobster, well I have some bad news. Last week, Red Lobster (RL) filed for Chapter 11 protection:

• Listing assets and liabilities of US$1B and US$10B, respectively. RL’s financial position had been deteriorating for several years, with diners down ~30% since 2019. 

• Despite some post-pandemic signs of recovery, sales were still declining, and the company posted losses of US$76M in fiscal 2023.  

• The insolvent restaurant chain now plans to hand control over to its lenders, who have agreed to provide US$100M in the form of a stalking horse bid to support the chain through its bankruptcy.

• As part of their ongoing Chapter 11 process, the company is now investigating whether the Thai Union Group (TUG), its former minority shareholder and largest supplier of seafood, was benefiting from its demise. Basically, Reb Lobster gave the shrimp contract to its major (and only at the time) shareholder, exclusivity. This ended up cost the company $11M.

The irony is that the endless shrimp promotion, ended Red Lobster. On a positive note however American BMI is expected to improve by at least 10% (not an actual fact). (Source: Financial Post)

Sick of all the ticketing fees collected by Ticketmaster? Well, so is the American government. The D.O.J filed an antitrust lawsuit against Live Nation, the parent company of Ticketmaster, accusing them of running an illegal monopoly over live events.

• Live Nation controls over 70% of ticket sales at major concert venues in the country, in addition to controlling 265 venues in North America and 60 of the top 100 amphitheaters in the US.

• Proponents of the lawsuit cite reasons such as poor customer service, confusing price tactics, expensive ticketing fees, and restrictions on ticket resales as the basis for the antitrust claim. They need a reason? It's called being ripped off.

• The Justice Department also accuses Live Nation of several illegal practices, including using long-term contracts to keep venues from choosing rival ticket sellers, blocking venues from using multiple ticket sellers, and threatening venues to use their service.

• Live Nation has since responded, saying the suit ignores other relevant factors and pointed to its 1.4% net profit margin as counter evidence to the claims of a monopoly.

I would like to test the 1.4% net profit margin. Wonder what the management fees and executive compensation is like. I mean adding Facility charge (that they mostly own), Delivery fee (hmm we don’t have paper tickets anymore) and Service fee (for what?) doesn’t sound like bad practice at all. (Source: AP News)

We keep reading about copper theft from buildings, houses, and construction sites. It turns out these thieves know something we don’t, at least according to fund manager Pierre Andurand.

• Per the Financial Times, he expects prices will quadruple, reaching $40,000 a tonne sometime over the next few years.

• Due to increasing global copper demand, particularly within the clean energy sector, Andurand anticipates major supply issues over the next five years. This may already be playing out, as this year alone we have seen prices rise by nearly 20%, reaching a record high of $11,000 per tonne earlier this week.

• Despite his conviction in the precious metal, Andurand is quick to acknowledge the risks of betting on supply chain disruptions. Last year, his fund suffered a 55% loss due to heavy-handed investment in oil futures.

• Those losses have since been erased, and the fund is up 83% this year (34% since inception in 2019) thanks in large part to copper appreciation. 

I personally don’t know enough about the commodity market to have some insight, but every predication will ultimately be proven. For those of you that remember the pennie. What don't you understand about copper? It makes perfect CENTS!

Have a fantastic weekend and for my American friends, Happy Long Weekend. Please feel free to forward this email as you see fit. As always I always welcome feedback. Next week, we will have a book review, the book I picked for this week was overly complicated and give my a headache. Ironically its title was ‘A Thousand Brains’.