Midstream rallied for a 6th straight week, but this week was different than the prior 5. This week’s rally was led by larger, more integrated players in the U.S. and Canada, not by gathering & processing MLPs. This week was less about bottom fishing or short covering. Broad equity market strength and a 25% oil price gain helped.
Stocks Versus The COVID-19
A few years before “Sleepless in Seattle” and nearly a decade before “You’ve Got Mail”, Tom Hanks and Meg Ryan starred opposite each other in one of my favorite films of all time: Joe Versus the Volcano (1990). After 600+ posts, I’m actually not sure if I’ve talked about the film here before. It’s sort of quirky, dark comedy that features great vintage Tom Hanks personality.
Incredibly, the film was released on March 9, 1990, exactly 30 years before the worst day in energy stock history. You remember, the day AMZ dropped 27.4% and AMNA dropped 22.2%.
I thought about this movie for a few reasons this week. First, staying at home for these last few months has been challenging in a mind-numbing sort of way that reminded me of the drudgery of Joe’s workplace at the start of the film. I love my job, but I can relate to the opening scenes of the film as I combat the combination of WFH, parenting and teaching school, especially with the barrage of earnings and data points this week. The days just blend together.
The basic plot points are Joe gets diagnosed with a rare uncurable terminal disease called a “Brain Cloud”, then he gets propositioned to jump into a volcano to appease the native population of an island by a rich man seeking to exploit said island for rare minerals. After a stunning lack of due diligence, Joe agrees to do it, eventually making it to the island after nearly dying of thirst and deliriously dancing on a raft made of giant luggage.
“Nobody knows anything. We’ll take this leap, and we’ll see. We’ll jump, and we’ll see. That’s Life.”
Joe leaps into the volcano (with Meg Ryan’s character), and (spoiler alert) the volcano spits them out. Also, the terminal illness was a lie. Joe and his new girlfriend are granted a chance to start fresh, although the film ends with them floating in the middle of the ocean.
This brings me to the second reason I thought of the film this week. Midstream stocks, MLPs in particular, appear to be getting spit out by the Volcano, given yet another chance at life after being left for dead at the end of March. MLPs are up 89% since then, and lowered guidance was more than priced in based on earnings reactions.
Distribution ex-dates this week slowed MLPs down a bit, and gains from here depend heavily on the existence and pace of an economic recovery, but the market is no longer pricing in a terminal illness for the group, which is good.
