2022-09-21
FOMC day
Stocks took a hit because the FOMC announced another 75bp hike. Short term rates are now above 3% (I’m never sure what rate is more important, but they are at 3% and 3.25% according to Trading Economics). SPX was down 2%, but it was lower in mid June. The message from the Fed was that they’re going to keep hiking. Not sure much can be read into that, as they would not say anything different if they were about to pivot. At least until Jay Powell has had a chance to tell his friends.
Long bond rates in the US (risk free) hit around 3.5%. The curve is pretty flat but not steeply inverted at least.
Crypto was strangely quiet: $BTC was down 0.14%. Ethereum is looking pretty sick. Jamie Dimon called crypto a ‘decentralized Ponzi scheme.’
Commodities, with the exception of precious metals were weak. Oil was down about 1% (WTI), but given the stronger reaction of stocks, my feeling is that the bear run for oil has run its course.
Aramco CEO speech
Unfortunately, the response so far betrays a deep misunderstanding of how we got here in the first place, and therefore little hope of ending the crisis anytime soon. So this morning I would like to focus on the real causes as they shine a bright light on a much more credible way forward.
When historians reflect on this crisis, they will see that the warning signs in global energy policies were flashing red for almost a decade. Many of us have been insisting for years that if investments in oil and gas continued to fall, global supply growth would lag behind demand, impacting markets, the global economy, and people’s lives.
In fact, oil and gas investments crashed by more than 50% between 2014 and last year, from $700 billion to a little over $300 billion. The increases this year are too little, too late, too short-term.
OK, Amin H. Nasser is talking his own book, but you know this is a guy who is very knowledgeable about the industry he is in, and I am sure has closely studied the economics of non-fossil alternatives to oil and gas.
I am not aligned with the oil industry or with the green movement. I just want to know what the outlook is for competing sources of energy. When I read the oil bulls, they tend to focus on rig counts, reserves, extraction rates, breakevens, volumes. When I read the green lobby output, it is much more woolly.
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