The Rhetorical Rhetoric: April 24, 2022
Palpable insight into the nonsensical narratives
04/24/2022 - Looking Ahead
Another weekend flies by, and the MSM stories keep turning around faster than a DJ Swamp performance. If you whack through the weeds, there are notable trends investors should be watching closely.
Currencies
Believe it or not, currencies are actually making headlines; and rightfully so. The Yen has been moving like a meme stock, and the rate of change is starting to make people sound the alarms.
The last sixty days has brought movement that should be making headlines.
While the yield curve has begun making headlines, it isn’t a far stretch of the imagination for the media to be making a big deal over something for the wrong reasons. In other parts in the world, inflation-adjusted returns on T-Bills is still high enough to offset the devaluation of their own domestic currency against a strong USD. The Bank of Japan is the US Treasury’s biggest client. For Japan, it’s a simple equation:
Fed Funds Effective Rate > Japan Sovereign Bonds
Japan is famously inflation-neutral; but, how long will the BOJ be able to hold the ship steady on its long-standing course of action?
The Chinese currency has been slowly gaining strength against the US Dollar since 2020, and this is a problem for them. It is in the best interest of China to have a weaker dollar versus the United States, part of the demand equation in the Chinese economy.
Interest Rates
The topic is yielding lots of interest as people scream about Fed policies invoking Volcker-era reactions in the market. In the latest episode of Eurodollar University, Emil and Jeff do radio theatre as they read transcripts and articles from those moments in time. It all sounds oddly familiar, doesn’t it? How will the rate of change in short-term rates play out for banks?
Commodities
The supply of real goods and raw materials continues to take punishing blows. For the sake of the environment, society needs to stop with the virtue signalling and pay attention to actual and active threats to large portions of arable land.
Nigeria has a serious problem.
Unemployment and poverty in the oil-producing Niger Delta have made illegal crude refining an attractive business but with deadly consequences. Crude oil is tapped from a web of pipelines owned by major oil companies and refined into products in makeshift tanks.
The hazardous process has led to many fatal accidents and has polluted a region already blighted by oil spills in farmland, creeks and lagoons.
Government officials estimate that Nigeria, Africa’s biggest oil producer and exporter, loses an average of 200,000 barrels per day of oil – more than 10 percent of production – to those tapping or vandalising pipelines.
That has forced oil companies to regularly declare force majeure on oil and gas exports.
https://www.aljazeera.com/news/2022/2/4/explosion-nigerian-oil-vessel-sparks-fears-major-spill
Explosion at Nigerian oil vessel sparks fears of major spill
While the extent of the damage is not clear yet, the boat can process 22,000 barrels of oil a day and store up to 2 million.
Then there is the looming global food distribution crisis. For some, there will be plenty, and for many more there will be none.
Rockefeller Foundation President Rajiv Shah told Bloomberg Television's David Westin a "massive, immediate food crisis" is on the horizon.
Shah provides what could be a timeline for the next global food crisis that could begin "in the next six months."
He said global fertilizer supply disruptions caused by the Russian invasion of Ukraine would have an "even worse" impact on the crisis, slashing crop yields worldwide.
Shah said debt relief and emergency aid for emerging market countries are needed to mitigate the effects of the food crisis.
I hate to say it, but this is just stating the obvious. What isn’t so obvious are the knock-on effects, unintended consequences, and how the unfolding global regime change distributes the stack of chips around the table.
Weird But True!
Raytheon is now touting their ESG-friendly weapons so that Pension Funds can be given the honour of passively investing in the weapons procurement economy, without the knowledge of individual account holders.
This rhetoric falls in line with headlines popping up since the onset of war.
https://www.ft.com/content/9073a69f-bc90-4944-b9d9-d2a0a2ff1f15
Are defence stocks now ESG?
Surely supplying weapons to the invaded underdog in an unprovoked fight is a social good
https://capitalmonitor.ai/strategy/responsilbe/how-exposed-are-esg-funds-to-weapons/
Why ESG funds are full of weapons
ESG funds have been slowly reducing exposure to weapons manufacturers, but Russia’s invasion of Ukraine has reignited a debate about whether such companies are ESG-friendly investments.
Oy vey, enough already, how about cute animals to soothe the cinched jaw?
https://finance.yahoo.com/news/the-fluffy-puppy-indicator-signaling-a-recession-162927588.html
The Fluffy Puppy Indicator is flashing red for the U.S. economy
As higher prices for gas and food has consumers sharpening their budgets for the months ahead, it looks like their cuddly pets aren't immune to the cutbacks.
Over the four-weeks that ended April 9, sales of pet supplies — in other words non-food items that pets don't need to live — fell 1.9%, according to the latest data from Nielsen. That's a sharp drop-off from the 12-week average increase of 3.6%.
Pet grooming sales also plunged 19.2% while dog accessories fell 12.1% and pet bed sales declined 12.7%. The lone increase of any size came in cat litter, which saw an 11.7% gain.
Early signs of less discretionary spending on furry loved ones are a Fluffy Puppy Indicator for the health of the economy in the coming quarters. After all, who doesn't want to keep Fido happy?
You know what they say, April showers brings May flowers. Does the spring have another recoil left in it before it breaks from poor craftsmanship, materials, maintenance, and fatigue from exposure? How long does Ukraine have to plant crops that the world depends on them for? Will Germany figure out how to keep the heat on before the onset of fall?
If Q1 and Q2 are supposed to be the good half of the year, I’m not particularly looking forward to the second half. How are y’all positioning yourselves to keep the payments going on your shirt?