23 Nov 2021

Oil

Democratic governments have decided that their re-electability is being threatened by rising energy prices, so they have released reserves of oil in a coordinated move to beat down the price. The problem is that with the world consuming approx 100 million barrels of oil a day, these reserves are really not that big a deal. After last week, oil is moving up again, which is bad for inflation and for the optics of government actions.

Wrap

All non-monetary commodities (more or less) were up, following the jump in oil prices. Some commodity-dominated markets were up (Brazil, Toronto) but most were down or flat. Bonds were pretty much flat.

Boris

Boris gave a speech to the CBI which was badly received. I have no idea why he was giving a speech to them: we are not in an election campaign, and there are plenty of policy problems to sort out. The FT was pretty scathing, but even The Sun, which is generally supportive, was not happy. Politicians make policy errors all the time, but normally the media give them the benefit of the doubt. Once the pendulum starts to change direction, it’s hard to get them onside. The media seem to believe that Johnson doesn’t have the stomach for a protracted battle, and might step down, which surely will be a disaster, electorally, for the Conservatives.

Join the club!

Today’s financial markets are weird. Huge amounts of money move around not because it makes any financial sense but because people enjoy coming together to join some sort of online club. And from the outside you can look at these phenomena and be like “ah, right, GameStop,” but it’s not always literally GameStop. Many modern financial phenomena are vaguely explained by “people are willing to put up real money to join an online club,” but the whole point of clubs is that there are _different _clubs. You join ConstitutionDAO because something in it speaks to something in you, or because your particular group of friends are all in that club, not — I hope? — because you are an indiscriminate club-joiner. You might like GameStop and shiba inus and scarce JPEGs and crowdfunding a copy of the Constitution but at some point how many of these things can you possibly like?

– Matt Levine on Bloomberg Opinion

Matt’s free newsletter is full of fun stuff. He has a great piece about the insanity of El Salvador’s ‘Volcano Bonds’ (you can replicate the payoff for a lot less money by buying some bitcoin and some already-traded El Salvador USD bonds). We do indeed live in a strange world. I blame the Fed.

Star Bulk Carriers

$SBLK:NDX has some strong results. The Baltic Dry Shipping index had been going up exponentially for a long while. Maybe this is a top. Read more.

J Powell lives to fight another day

The months of suspense are over. It’s Jerome! But there are a lot of other Fed governors left to appoint, and they are likely to be much more progressive than J. Robert Kuttner points out that the remaining appointments are likely to clash with Powell, and quite possibly lead to his resignation, to be replaced by Brainard. I think that, for once, Biden has played this with skill.

Doomberg is dope

This post explains a lot about the natural gas market. It’s by some guy called Doomberg. It’s excellent. It points out that

By now we all know Europe is a decidedly different story. Through a combination of poor planning, scientific illiteracy, and economic arrogance, the EU finds itself entering peak heating season with criminally low levels of natural gas in storage. The chart below tells the story – this year’s max inventory falls well below any in recent history.

The consequence is big profits for LNG carriers, Russia, Quatar, and Australia LNG exporters. The other consequence is big bills for European households, and an increasingly difficult situation for politicians who have been claiming that Net Zero won’t involve any financial or other sacrifices.