Wrap

The main action today was in crude. The near month future settled at over $70. It was $62 a month ago.

Equity markets were up, in parts. World markets were flat.

Energy generally was up, as were energy stocks. $BTU was up 11%! Starving energy companies of capital will not directly reduce the demand for oil, which continues to go up and an undiminished rate. Mark Carney can bleat on about “stranded assets” as much as he likes, but developing economies are going to want power stations that can be constructed quickly and cheaply, run 24x7, are compact, and can be located close to centres of population. Coal, oil and natural gas will be the winners. China may slow down building coal plant, but they will make sure that Vietnam gets the coal stations that would otherwise have been built in PRC. I don’t argue for a moment that this is a good thing. I am just trying to guess what is going to happen. I leave what “should” happen to the politicians, who prefer to keep things very vague.

Yup, inflation was “transitory” between 1974 and 1981 too

Alex Manzara riffs on inflation again.

I think we’re going to see this again.

I know that there are arguments to say that the demand for money is much greater now, for collateral purposes, so the QE and M2 explosion don’t matter so much now. This was argued in the latest edition of Macro Musings (which is always worth listening to). I certainly think we won’t get a repeat exactly of this. Maybe the 40’s will be a better comparison. Nobody remembers the 40’s & 50’s being inflationary, probably because the govt. took no action to suppress it, so people still got to borrow at 2%.

I really don’t know what will happen, but more people seem to be predicting inflation than predicting the opposite.

Global minimum tax rate

The G7 finance ministers met in London over the weekend. I’m sure the travel created a few tonnes of CO~2~ equivalent. The communiqué is typically vague. A minimum figure for tax is quoted, as a percentage of corporate profits, but no mention is made of how to measure profits. It’s well known that average corporation taxes are less than half of marginal rates, as a proportion of reported profits. Companies report many different profit rates, including the notoriously “Community Adjusted” rate of We Work. Vague statements like this are the lifeblood of the lobbying industry. I am confident that the CEOs of the FAANG lost no sleep over the G7 announcement, which was just one paragraph long.

Propublica Tax Leak

As everyone knew, billionaires pay no Federal Income tax. Their companies arrange for them to get richer (than Croesus), and then they fund their lifestyle against their wealth by borrowing. Anyone can do this: start a company, own a good chunk of it. Make profits. Use these profits to buy back shares (but not those owned by the founder). Watch the share spike in value, borrow against them. Rinse and repeat. Buffett, Bezos and Bloomberg paid tax at a rate of less than 1.3%. Buffett paid 10bp on his increase in wealth. Elon Musk paid only 3.27%, a figure that will have plummeted as he became the world’s richest man.

I am sure that these billionaires are furious, but the cat is out of the bag. I just hope that whoever did the leaking covered his tracks well. These guys have plenty of money and will use it to destroy anyone who stands up to them. It might be worth downloading the article to read at leisure, as it’s perfectly possible that Bezos is pulling the plug on the Pro Publica servers as we speak.