The Fed raised rates last Wednesday by 0.25%, a very inadequate response to the realities of fast-approaching double-digit inflation. Gone are the days of decisive bold leadership of a Fed led by Paul Volcker. At the same time, expectations are that a peace agreement will be reached between Ukraine and Russia. We certainly hope so, but we are not exactly holding our breath about it, given the belligerent madness of Putin, and the fact that when an autocrat becomes a tyrant who runs a mobster state with the help of paranoid thugs, then the people and the world suffer.
In this edition of the series, we focus on the medium-term effects of higher prices in energy, grains, and fertilizer. As for the geopolitical lessons, we believe that Russia is almost done as an influential power (with the exception of its nuclear capabilities), while China seems to be getting on the bus of understanding that practices outside the boundaries of acceptable behavior will face severe consequences. Next stop for the US bus: the digital dollar a.k.a. “Project Hamilton” that will govern international transactions.
Before we say a few things about inflationary forces, let us share with you our thought that the official statements by Chinese officials last Tuesday, may mark that a watershed point/bottom for Chinese tech stocks may be approaching. The statements indicated that the tech crackdown will cease, that stimuli and market support will be demonstrated and that some form of compliance with US standards (SEC-related) should be forthcoming (in order to avoid delisting, especially of big Chinese names traded in US exchanges)
Now, as for inflationary pressures here are some facts that make us believe that higher conventional energy, metals, and grain prices will remain elevated, and hence exploring solid names around those sectors might be a good idea
Commodity markets exhibit an upward trajectory that seems to be sustainable for the short-term, if not for two-three years.
Russia is the #1 exporter of natural gas, the #2 exporter of oil, and the #3 exporter of coal. As supplies are reduced, prices will continue rising.
Financing for Russian imports is drying up, as banks hesitate to issue letters of credit for such imports, even those which are not yet banned. Getting insurance for such imports is also pretty challenging.
Russia also plays a significant role in the aluminum, wheat, nickel, palladium, copper, and fertilizer markets.
When bans of energy imports were announced, oil prices skyrocketed. Additional bans may be forthcoming, and Europe will be limiting Russian imports.
Replacing the Russian imports with production from other sources will take time and it logistically faces challenges.
Rising energy and metals prices may lead to reduced demand and may affect growth negatively. Rations may be instituted if shortages are observed, at which point prices may increase substantially. Poor nations will suffer the most.
Canceling the Noise; Not by Bread Alone Part V
Author : John E. Charalambakis
Date : March 18, 2022
The Fed raised rates last Wednesday by 0.25%, a very inadequate response to the realities of fast-approaching double-digit inflation. Gone are the days of decisive bold leadership of a Fed led by Paul Volcker. At the same time, expectations are that a peace agreement will be reached between Ukraine and Russia. We certainly hope so, but we are not exactly holding our breath about it, given the belligerent madness of Putin, and the fact that when an autocrat becomes a tyrant who runs a mobster state with the help of paranoid thugs, then the people and the world suffer.
In this edition of the series, we focus on the medium-term effects of higher prices in energy, grains, and fertilizer. As for the geopolitical lessons, we believe that Russia is almost done as an influential power (with the exception of its nuclear capabilities), while China seems to be getting on the bus of understanding that practices outside the boundaries of acceptable behavior will face severe consequences. Next stop for the US bus: the digital dollar a.k.a. “Project Hamilton” that will govern international transactions.
Before we say a few things about inflationary forces, let us share with you our thought that the official statements by Chinese officials last Tuesday, may mark that a watershed point/bottom for Chinese tech stocks may be approaching. The statements indicated that the tech crackdown will cease, that stimuli and market support will be demonstrated and that some form of compliance with US standards (SEC-related) should be forthcoming (in order to avoid delisting, especially of big Chinese names traded in US exchanges)
Now, as for inflationary pressures here are some facts that make us believe that higher conventional energy, metals, and grain prices will remain elevated, and hence exploring solid names around those sectors might be a good idea
And because we don’t live by bread alone: