Monday 31, January 2022
Oil Rant
I am an oil bull. Fossil fuels may have some bad externalities, but they have been the chemical basis of our current civilization. Most people alive now would never have been born if it were not for humans’ exploitation of coal,oil and gas. For some people, this is not something that they are concerned about: if you’ve never been born, you can’t vote or bear a grudge. I am not even sure if a strict utilitarian would say that would be a problem.
For the whole of my adult life, scientists have been attempting to find alternatives to fossil fuels. Battery vehicles were the future when I was in school, a very long time ago. They still are, although they account for a very small number of actual vehicle miles, and the energy they convert into motion is largely derived from fossil fuels still.
Nuclear energy has been the great white hope, but from a time long before I was born. Transitioning to zero carbon is insanely difficult.
To eliminate oil, we’d better make it expensive. But this will have a huge impact on the economy. The spiking oil price in 2008 certainly contributed to the global financial crisis. All economic growth has an element of a Ponzi scheme, as Minsky said. It’s satisfying to pop a bubble, but real pain is caused and real politicians lose their sinecures.
I thought I’d check how successful Al Gore had been in persuading the world to use less oil. The answer, unsurprisingly, is “not very.”
Doomberg on US energy policy, well worth a read.
Retail squeeze?
ETFchannel.com’s most shorted ETFs. The most shorted (and hated) sector is retail. XRT, the SPDR retail ETF is short to the tune of 264% of the shares outstanding. (No, I don’t know how this is possible either, but ETFs are different: they can be created without limit by the issuer, so delivery would not be a problem probably.) Anyway, maybe bricks and mortar retail will go the way of the steam engine, but somehow I think it’s got some life in it yet, not least because of the rise of “click and collect.” Anyway, as always, not investment advice.
Daycare, nursery, Pre-K, early-years, head-start, sure start etc.
This article makes the case that “pre K” education (daycare) doesn’t have much of a positive effect on outcomes. Most politicians love to promise more early years education as a measure which can “level up” the outcomes of poor kids and rich ones. It’s easy to see why it appeals to politicians, and it’s intuitively appealing to all of us, but it seems that it just doesn’t work. The elephant in the room is that most education doesn’t have much impact, compared to other factors, but it’s hard to admit this. Well, I guess it doesn’t matter, because these sorts of results have been around for a long time without making much impact on the politics.
Wrap
Today was very odd. Equities rallied strongly. FAANG and consumer discretionary stocks ($TSLA) led the charge. Elsewhere the market was tranquil, apart from FX, where the dollar sank back to where it was before the weekend.
To my mind, the steep fall in equities had probably got ahead of itself, and asset managers were keen to make their January results look not quite as terrible as they might have been. $TSLA shot up 11% ($88 to $934), supposedly as a the result of a positive note from Credit Suisse (who make the most perfect calls of all investment bankers, as everyone knows).
Eurodollar futures and the 10Y moved by less than one bp. To me this suggests are reversal of today’s equity carnage, but this is a view I hold very weakly indeed.
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