The day

Today I was travelling. I took a quick look at the markets before turning in. Normal service will be resumed tomorrow.

Wrap

It looks as though the markets are gradually waking up to the reality of inflation in the USA. The scale of the fiscal activity is beginning to make people think that this time is different to 2008, and that we will see some inflation before long.

• US 10Y up to 1.61%,
• USD up approx 0.15% vs EUR and JPY,
• VIX (May future) up 5.7% to 19.3%,
• commodities start to wobble. Lumber down 3.8%, but after an insane run, metals strong, oil complex flat,
• NDX down 2%, many of the FAANG more than that. Rising yields are kryptonite for growth stocks.

A couple of stocks had big moves:

• Filo Mining ($FIL) was up 10%,
• Peabody Coal ($BTU) was up 15.8%.

My instinct is that fossil fuels have hit a bottom. As ESG funds starve them of capital, the returns will increase. Coal is still responsible for 70% of all electricity generation throughout the world. A coal or natural gas power plant has huge advantages over renewable power, in terms of capital costs and speed of build and flexibility. In the West, we may be able to afford windfarms, but in the developing world, they just don’t have the time or the money. I know this is an unpopular view, but making money in the markets is about understanding what is going to happen, not what should happen.