Monday 13, December 2021

Lyn Alden’s newsletter

One of the newsletters I look forward to reading is the on from Lyn Alden. A big plus is that it is issued only once a month. The other is that it gives a lot of interesting facts.

You can read her latest one here. She points out how important oil is for the global economy. This confirms my priors, so I’m predisposed to take an interest, but she gives some factual backing to the statement. The world has got rich as a result of burning oil. The externalities may be material, but to pretend that oil specifically, and fossil fuels generally, have not been vital to allowing us to live in the comparative ease of today is dishonest.

Lyn is very transparent about what she invests in. I’d recommend taking a look. Personally, I’d avoid the Ponzi stocks like $MSTR, but I can understand why she needs them to maintain diversification to a broad range of asset classes, which is the main reason they are going up.

Lyn points out that ice cream sales and shark attacks on swimmers tend to be correlated. This is not because sharks are attracted to ice cream. It’s because both consumption of ice cream and availability of swimmers to attach are driven by hot weather. In the trade, this is known as “the dreaded third factor.”

Wrap

Today was a risk-off day. The Nasdaq was off 1.5%, others more like half that, but nearly all took a hit towards the close of business in the US.

US consumer expectations were 6% in Nov. I really think this matters.

Most commodities were hit hard, except gold and silver. WTI was down 0.6%.

Bond yields, predictably, dropped. US 10 year came down to 1.4156%. This is back to where it was in Feb. The bond market just doesn’t buy the inflation narrative. Either it’s wrong, or a host of pundits are wrong. I don’t want to put my money on either, but you can see why cynics put money on a crash, a crushing of demand and a flattening of the (yield) curve.

There must be a FOMC meeting coming up. I regard today’s price action as a kind of warning shot over the bow of the Fed to soften it up, to foreshadow the scale of the carnage if they dare to tighten. It may sound crazy, but it’s worked so far.

Weirdly, the Turkish Lira strengthened. It has a good current account surplus, but otherwise it’s hard to see the reason why.