February 2025

[qldfrog]

What's up with crypto?

View attachment 192469

jog on
duc

My orders might go thru..been waiting for a while
Start of the crash we needed to have?gold might be a bargain soon

 

[qldfrog]

My orders might go thru..been waiting for a while
Start of the crash we needed to have?gold might be a bargain soon

Btc etf purchased.
I believe the other orders on the crypto exchange might have been filled as well
Let the show begin

 

[ducati916]

Markets having a moment:




Pretty much USD up
Everything else down

jog on
duc

 

[ducati916]

Tariffs:

Canadian hockey and basketball fans are booing the U.S. national anthem at games. Liquor stores in Ontario are taking American booze off their shelves. Do you know what it takes to make Canadians this mad at you?

Why it matters: It takes a trade war, apparently. And regardless of whether Trump's promised tariffs go into effect, Canadians' newfound open hostility to the United States is an example of the longer-term economic risks at play.

• There are estimates floating around on what the new import taxes mean for GDP and inflation, but the numerical details miss the point.
• This will prove a very difficult bell to unring and points to a new era in which businesses cannot count on any country to be a permanent partner of the United States.

By the numbers: If promised 25% tariffs on Mexico and Canada (10% on Canadian energy) are implemented and the countries retaliate as they promise to do, it would add 0.76 percentage point to U.S. inflation and subtract 0.4 percentage point from U.S. GDP growth, estimates the Yale Budget Lab.

• An extended trade war would prove costly for specific sectors, including U.S. automakers (who rely on supply chains that crisscross North American borders), homebuilders (who use Canadian lumber and gypsum) and agriculture (fertilizer).

Yes, but: The United States is a large, resource-rich, geographically diverse nation that relies less on imports than smaller countries. That's why neither forecasters nor financial markets are betting that aggressive trade measures will cause recession.

Between the lines: As the U.S.-China relationship has become more hostile over the past decade, Western companies have looked for ways to decrease dependence on China. A frequent solution offered by the corporate class was "friendshoring."

• The idea is to shift supply chains toward countries with deep, stable relationships with the United States.
• The trade relationships with Canada and Mexico have been viewed as the most stable of all, built upon the North American Free Trade Agreement enacted in 1993 and an update of it, the U.S.-Mexico-Canada Agreement, signed by Trump five years ago.

Flashback: "The USMCA is the largest, fairest, most balanced, and modern trade agreement ever achieved," Trump said then.

• That embrace of North American trade, combined with the Biden administration's emphasis on friendshoring and deepening relationships with allies, gave a green light to companies looking to invest further in a North American supply chain.
• But now, Trump has pushed toward higher tariffs on imports from Canada and Mexico than from China.

What we're watching: Does the cross-border hostility created by the possible trade war between neighbors with a three-decade-old free trade deal — symbolized by those boos at an Ottawa hockey arena — portend a broader breakdown in this economic interconnection?

The bottom line: There's no such thing as friendshoring if you don't have any true friends.


Cullen Roche:

1) The Lifetime of Stocks is…Shrinking.
I loved this chart from Bank of America which shows the average lifespan of companies in the S&P 500 since 1960. The message from the bank is that incumbent firms are being disrupted much more rapidly. And it’s true. Many of the largest firms we all know of today did not even exist 20 years ago. This is good and bad.



Higher turnover means we have a faster pace of what Schumpeter called “creative destruction”. That means new entrants are innovating quickly and knocking off stale incumbents. It’s bad in the sense that this makes stock picking a lot harder because you can’t just buy and hold firms you expect to be around for decades.

But the thing I really like about this chart is that, despite the shrinking lifetime, that lifetime is still extremely long at 18.3 years. We spend so much time talking about the stock market on a daily, weekly and annual basis, but this data shows that stocks are, at a minimum, multi-decade instruments. This is what I try to communicate with the Defined Duration investing strategy. Stocks are inherently long-term instruments and they need to be utilized in a portfolio in a manner consistent with long-term thinking. That means thinking in truly long-term time horizons across decades and not years. This is why I always ignore short-term market narratives about the stock market. No one knows what stocks will do in the short-term because you cannot make a long-term instrument behave like a short-term instrument no matter how much you trade it.

2) Bitcoin Going to $0?
Gene Fama kicked the Bitcoin hornet’s nest this week when he appeared on a podcast and predicted that it would go to $0 within the next 10 years. I think this prediction is likely to be wrong and indicative of the academic sort of thinking that most traditional financial theorists utilize. The thing is, from an asset pricing perspective, an asset like Bitcoin is virtually impossible to value. In traditional finance we like to use things like discounted cash flows or similar cash flow based metrics to value an asset. We assign multiples of revenue, EBITDA, etc. But when an asset doesn’t generate cash flow it becomes difficult to value.

Bitcoin is more like a piece of fine art than a cash flow generating corporation. And to value something like a piece of art you need a more subjective asset pricing model. Personally, I don’t have a strong opinion on that as it pertains to Bitcoin’s specific price and the primary use case I consider with Bitcoin is fiat currency insurance. That is, if you live in a 3rd world country where the risk of currency collapse is high then owning something like Bitcoin makes a great deal of sense. If you’re an American using the world’s reserve currency I don’t think that argument is nearly as compelling. But I find it very compelling from the perspective of any 3rd world economy, especially those with unstable authoritarian economies. What is insurance worth to someone? That’s a super personal question and one that an asset pricing model isn’t going to help you quantify.

But $0 is an extreme sort of prediction. And it misunderstands the huge underlying infrastructure and network effect that has developed around Bitcoin. This isn’t merely something trading on pure speculation. There’s now a trillion dollar infrastructure in Bitcoin mining, embedded (incentivized wealth) and regulatory apparatus that utilizes this asset. None of that means it can’t fall significantly and given its history it wouldn’t be remotely surprising if it falls 80%+ at times, but for it to go to $0 you’re talking about the collapse of the entire global Bitcoin mining industry, the now billion dollar ETF structure and a complete and total collapse in the confidence that supports this asset. Could that happen? I guess it could in an environment where, for instance, the power grid went out forever, but the probability of that happening in the next ten years is extremely remote in my mind.

Of course, whether any American should own Bitcoin as fiat currency insurance is a whole other question….Fama would probably disagree with my framing of it as fiat currency insurance, or I supposed he’d prefer other assets to insure that risk, but I guess that’s why I don’t consider myself a disciple of Modern Portfolio Theory.

3) The Return of the 2010s?


One of my dominant themes over the last few years was the theory that the post-Covid economy would eventually mean revert right back to the pre-Covid economy. In other words, once the dust settled on Covid and all that stimulus, I expected the economy to start looking a lot like it did in the period from 2015-2020 when inflation was low and growth was low, but stable. That was a perfectly good environment, despite the low growth. In fact, I’ve argued that low and stable growth is better for a big economy than experiencing high and unstable growth.

We got a pretty interesting piece of data this week in the GDP report which I believe is starting to confirm this. RGDP came in at 2.3% which was almost perfectly in-line with the average GDP we saw since 2010. So, we already know that inflation has moderated almost to the Fed’s target and now we’re seeing GDP readings that are more consistent with the pre-Covid period.
But the primary takeaway from this developing trend is that this environment isn’t the return of the 1970s. It’s actually looking like it’s not remotely close to the 1970s. And more recently we’ve heard comparisons to the late 90s. But that was a true economic boom with average RGDP of 4.1%. This also doesn’t look like that. So, in my view the return of the pre-Covid economy looks to be well on track. And that’s not necessarily a bad thing. Of course, the curveball in all of this could be Trump’s economic agenda. The tariffs combined with significant government spending cuts create some downside risk to this forecast. But we’ll have to wait and see how much of this is negotiating bluster and how much of it is real.

So do you buy-the-dip?





Really, who knows, just I chop zone.

But if there is no follow through to today's close from the bears, then I think we trade higher tomorrow, but that $601 range on SPY is a major resistance point currently. That is the line in the sand. Get past that, we go higher.

Silver News:

Tariffs on US imports from Canada (25%), Mexico (25%), and China (10%) began February 1, 2025.

In 2024, the US imported 4,200 tonnes (135 million (M)) oz. of silver and using the latest available data from 2020 to 2023, approximately 44% of US silver imports came from Mexico and 17% came from Canada according to the US Geological Survey.

The 82M oz. imported annually from Canada and Mexico is now incentivized to be sourced from other cheaper sources.

As 70% of silver mine production is a minor byproduct of the mining of other primary metals, mine supply of silver from other countries simply cannot respond quickly to added silver demand irrespective of the price of silver.

Silver vault stockpiles in London and Switzerland are thus going to see growing demand for added silver delivery to the US market to make up in-part for the tariff penalized silver supply from Mexican and Canadian miners.
As noted over the last several months, London’s vaulted silver stockpiles are already at a critical level where very little of the silver in London vaults is available for delivery to provide liquidity to the physical silver market.
With an estimated 4 billion (B) to 6B oz. of only fractionally-backed silver promissory notes for immediate silver delivery issued into the London cash/spot silver market, some market participants will begin to default if reallocation of added silver delivery demand to London continues over time.

The Bank of England that coordinates the multi-decade London price rigging of silver and gold in London is going to have a very rough time in the weeks and months ahead.

Blackrock Inc. that operates the world’s largest silver Exchange Traded Fund (ETF) in the ‘SLV’ iShares Silver Trust also merits close observation.

​

Figure 1 - Donald Trump Receives Gold Bullion Building Lease Payment - Sept. 15, 2011; photo source: Associated Press






jog on
duc

 

[ducati916]

Oil News

Canada’s oil industry has dodged the bullet with the United States’ 25% tariff threat, only to be penalized by a 10% levy on Saturday and then subsequently lifted for a grace period of 30 days, taking oil sands producers to a rollercoaster of emotion this week.

- Almost all of Canada’s 4 million b/d flow to the United States, with some 65% of those exports taken in by refiners in the Midwest, a region that has no other supply route because infrastructure in the Gulf Coast is geared towards exporting light barrels from the US.

- Analysts have found that Canadian tariffs would have the biggest impact on US Atlantic coast gasoline markets, with a 25% tariff on imports hiking prices by $0.50 per gallon to $2.5/USG, whilst higher oil sourcing costs adding some $0.20 per gallon to Midwest gasoline prices.

- Bypassing US sanctions would be easier for Mexico as all its US-bound flows are seaborne and could be re-routed to Asia, however Valero Energy’s term contract with Pemex could become a point of legal contention.

Market Movers

- US offshore producer Talos Energy (NYSE:TALO) appointed Paul Goodfellow, formerly the global deepwater chief of UK-based energy major Shell (LON:SHEL), as its new chief executive.

- Azerbaijan’s state oil firm SOCAR has agreed to purchase a 10% stake in Israel’s offshore Tamar gas field from Union Energy, the investment vehicle of Israeli businessman Aaron Frenkel.

- US oil firm EOG Resources (NYSE:EOG) won production sharing contracts for two offshore blocks in Trinidad and Tobago, with the Caribbean nation seeking to halt production declines and allocating one block each to BP and Shell in 2024.

Tuesday, February 04, 2025

The US-Canada tariff flare-up lifted oil prices for a brief period, but with the 30-day postponement of those restrictive measures, the oil markets are now assessing the impacts of another trade war, a potentially even bigger one between the United States and China. With ICE Brent dropping dramatically to $74 per barrel, the main fear is that the US-China spat could seriously damage oil demand growth this year, already under pressure from weakening margins.

Gold Prices Hit Record Highs on Tariff Frenzy. Prices of the bullion skyrocketed to an all-time high this week, with Monday seeing gold hitting $2,830.49 per ounce in intra-day trading, driven by market uncertainty surrounding Donald Trump’s tariffs and the probability of retaliatory trade wars.

OPEC Ditches The EIA as Secondary Source. In its Monday JMMC ministerial meeting, OPEC+ agreed to stick to its policy of gradually returning cut production from April 2025 onwards, all the while scrapping the US Energy Information Administration and Rystad Energy as secondary sources.

Ukraine Hits Major Russian Refinery, Again. Following last week’s strik on Russia’s Ryazan refinery, Ukrainian forces struck another refinery in the Volga region, the 300,000 b/d Volgograd plant that is the largest in southern Russia, whilst also targeting a condensate splitter in the city of Astrakhan.

Trafigura Top Official Gets Jail Time for Bribes. Switzerland’s top criminal court convicted Trafigura and its former chief operating officer Mike Wainwright, sentencing the latter to 32 months in prison for bribing Angolan officials in exchange for oil contracts between 2009 and 2011.

Iraq Moves Closer to Settle Kurdish Row. Iraq’s parliament approved a budget amendment that would allow Baghdad to subsidize production for international oil firms operating in the semi-autonomous Iraqi Kurdistan region, setting the rate at $16 per barrel and edging closer to the restart of Kurdish exports.

Beijing Retaliates with Oil and Gas Tariffs. In retaliation to Donald Trump’s across-the-board 10% tariff on any Chinese product, China’s State Council imposed a 15% tariff on coal and liquefied natural gas imports from the US, and a 10% tariff on crude oil and heavy machinery.

Nigeria Mandates Domestic Supply Quotas. Nigeria’s upstream oil regulator NUPRC said it would deny export permits for oil cargoes for producers that fail to meet stipulated supply quotas to local refineries, as the country ramps up long-stalled NNPC plants in Port Harcourt and Warri.

Wright Confirmed As US Secretary of Energy. Former chief executive officer of drilling firm Liberty Energy, Chris Wright was confirmed as the US Secretary of Energy by a vote of 59 to 38, using the agency’s 50 billion budget, pledging to unleash a new LNG expansion and modernize the power grid.

Norway’s Largest Oilfield Suffers Power Outage. Europe’s largest producing oilfield, the Equinor-operated (NYSE:EQNR) Johan Sverdrup, has suffered a power outage that left the platform without electricity for 8 hours, just two months after a similar incident in November.

EU Struggles to Meet Its Own Inventory Targets. Europe is struggling to meet its self-declared natural gas inventory targets as regional storage levels were 53% full as of February 1, only slightly above the 50% goal set forward by the EU, with France’s gas stocks as low as 35% in recent days.

ADNOC Eyes Canadian Petrochemical Producer. ADNOC, the national oil company of the UAE, is considering the joint acquisition of Canadian petrochemical firm Nova Chemicals alongside Austria’s OMV (VIE:OMV), with the Calgary-based firm currently owned by UAE’s sovereign fund Mubadala.

South Korea Eyes First Ever Oil Discoveries. US geoscientists have appraised and identified 14 oil and gas prospects in South Korea’s East Sea, potentially containing between 0.7 and 5.2 billion boe, raising hopes of an upstream breakthrough for a country that has never produced oil in its history.

Beijing Tightens Export Controls on Defense Metals. China’s Commerce Ministry announced export restrictions on five metals used in defense and clean energy in response to US tariffs, ranging from tungsten and tellurium all the way to molybdenum, prompting a price rally outside China.

Tariffs


Trump campaigned on using tariffs to revive domestic industry and fill America's coffers.

• In the last 24 hours, the tariff strategy looks more muddled than ever.

Why it matters: Trump has sent mixed signals about why his administration is slapping tariffs on billions of dollars' worth of imports, sparking confusion about whether the measures are temporary threats or the new economic normal.

• A trade war is underway with China, though every instance of tariff threats before that — Colombia, Canada and Mexico — has ended with Trump backing off, following concessions on areas of policy unrelated to trade.
• The economic impact of tariffs might prove minor if they are merely a negotiating tactic to extract non-trade-related concessions. But if they become a permanent feature of U.S. policy, they'll have a more lasting impact on the economy, markets, and business decision-making.

What they're saying: "If you move the tax base onto imports, then you now need imports to generate revenue," Jason Thomas, head of global research and investment strategy at Carlyle, tells Axios.

• "But if you have tariff rates that are so high that it leads to more domestic production, well, now you can't generate revenue. These two things are not mutually consistent with one another," Thomas adds.

Catch up quick: Tariffs on most North American imports are temporarily on ice after Canada and Mexico struck a deal with Trump.

• But the 10% tariff on all imports from China took effect this morning. No product is exempted from the import tax, unlike in Trump's first term.
• Overnight, China hit back, threatening retaliatory 15% tariffs on a slew of U.S. imports, including farm machinery, coal and natural gas. It will also restrict exports of crucial minerals.

The intrigue: China's retaliatory measures won't go into effect until next Monday. In theory, that offers a window for Trump and Chinese leader Xi Jinping to land a deal that could stave off the trade war — much like Canada and Mexico. (They are due to speak later today.)

That appears to be the ideal outcome. Speaking in the Oval Office yesterday, Trump suggested the tariffs were a negotiating tactic.

• "China hopefully is going to stop sending us fentanyl, and if they're not, the tariffs are going to go substantially higher," Trump told reporters.

Yes, but: Trump also returned to a regular frustration about trade deficits when defending tariffs. He has also said tariffs would be a source of government revenue that could help pay for his tax legislation.

• "I think that there is this presumption that revenue associated with tariffs will offset some portion of those tax cuts," Carlyle's Thomas says.
• "As we get closer to that, we'll have to see more evidence of what really intends to be permanent, as opposed to which tariffs are more trying to shape the behavior of foreign governments."

jog on
duc

 

[ducati916]

Everything you could possibly want to know about tariffs



DOGE

If Musk's DOGE succeeds in its efforts to seriously reduce federal employment, it would likely be enough to ding the overall U.S. labor market — but just create a little dent.

The big picture: Given the massive U.S. economy, even hundreds of thousands of people potentially losing their jobs isn't enough to significantly move the overall unemployment rate.

• But the impact on specific locations — the Washington, D.C., metro area in particular — could be greater.

By the numbers: The federal government employed 3 million people in December, per the Labor Department, but if you exclude the Postal Service and military, that number is 1.85 million.

• If the Trump administration were to cut 20% of those jobs through buyouts, firings or pressure to quit, that would result in 370,000 current government employees out of work.
• If every single one of those people were counted as unemployed, it would be enough to push the national unemployment rate to 4.3% from its current 4.1%.
• However, that's an unreasonable assumption, because many of those discharged employees would either retire (and thus no longer be part of the labor force) or quickly find new jobs. So the actual impact on headline unemployment would likely be lower.

The intrigue: It is a reminder of just how massive the U.S. labor market is. In December, 2.6 million Americans quit their jobs and 2 million were fired. A few hundred thousand government workers quitting or being forced out would only temporarily increase those numbers.

• It would, however, be a big change from the norm; federal government employment is traditionally very stable.
• In December, only 7,000 federal employees were laid off or fired, and 11,000 quit. Look for those numbers to go way up as 2025 data is released.

Of note: The economic impacts of large-scale federal job cuts on specific geographies are likely to be higher.

• In the D.C. area, 11% of all jobs are with the federal government.
• If the Trump administration eliminated 20% of D.C.-area federal jobs and all of those people became unemployed, the local unemployment rate would nearly double to 5.5%, from its 2.8% December level. (But given the caveats above, the actual impact would certainly be lower than that.)

What they're saying: "It is too early for these to affect the January numbers," wrote BNP Paribas economists in a note. Employment numbers due out Friday cover a period before the inauguration.

• "That said, [the buyouts] suggest net downward pressure on federal employment over time," they wrote.

jog on
duc

 

[qldfrog]

Everything you could possibly want to know about tariffs

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DOGE

If Musk's DOGE succeeds in its efforts to seriously reduce federal employment, it would likely be enough to ding the overall U.S. labor market — but just create a little dent.

The big picture: Given the massive U.S. economy, even hundreds of thousands of people potentially losing their jobs isn't enough to significantly move the overall unemployment rate.

• But the impact on specific locations — the Washington, D.C., metro area in particular — could be greater.

By the numbers: The federal government employed 3 million people in December, per the Labor Department, but if you exclude the Postal Service and military, that number is 1.85 million.

• If the Trump administration were to cut 20% of those jobs through buyouts, firings or pressure to quit, that would result in 370,000 current government employees out of work.
• If every single one of those people were counted as unemployed, it would be enough to push the national unemployment rate to 4.3% from its current 4.1%.
• However, that's an unreasonable assumption, because many of those discharged employees would either retire (and thus no longer be part of the labor force) or quickly find new jobs. So the actual impact on headline unemployment would likely be lower.

The intrigue: It is a reminder of just how massive the U.S. labor market is. In December, 2.6 million Americans quit their jobs and 2 million were fired. A few hundred thousand government workers quitting or being forced out would only temporarily increase those numbers.

• It would, however, be a big change from the norm; federal government employment is traditionally very stable.
• In December, only 7,000 federal employees were laid off or fired, and 11,000 quit. Look for those numbers to go way up as 2025 data is released.

Of note: The economic impacts of large-scale federal job cuts on specific geographies are likely to be higher.

• In the D.C. area, 11% of all jobs are with the federal government.
• If the Trump administration eliminated 20% of D.C.-area federal jobs and all of those people became unemployed, the local unemployment rate would nearly double to 5.5%, from its 2.8% December level. (But given the caveats above, the actual impact would certainly be lower than that.)

What they're saying: "It is too early for these to affect the January numbers," wrote BNP Paribas economists in a note. Employment numbers due out Friday cover a period before the inauguration.

• "That said, [the buyouts] suggest net downward pressure on federal employment over time," they wrote.

jog on
duc

Numbers are always interesting, past the outraged crying of our biased media, especially compared to Australia.
From the anove
#Import from China in the US..less than 15%!!
27% of imports are from China in Australia and only because the number are affected by a 10% US import made by the billions in submarines and defence overspending
#Only 11% of workers in DC are working for the feds it is 24 % in Canberra down from 31% 10y ago with the higher use of external contractors
I believe except for the car industry which nevertheless is in a dire position in the states, tariffs against China, Mexico and Canada are actually quite doable and likely to benefit overall Americans.
It will also highlight in many countries outside the US:
EU, Australia,NZ how screwed we let ourselves be.
How different and stronger the US overall economic system is compared to the rest of the West.
And let's remember that unless an ABC or The Guardian reader, we all know all these declarations are negotiations tactics round 1.
A very interesting economics experience imo.
Time will tell, the only given is high volatility: i played and lost last night on Google..5% loss

 

[ducati916]

• The US Dollar Index ($DXY) reversed sharply lower yesterday after flirting with multi-year highs. It continued south today, closing slightly below $108.
  
• Jeff points out that $DXY hasn't spent much time above $108 over the past 35 years. However, when it's been above this critical threshold, Tech stocks have historically underperformed.
  
• Tech has been the worst-performing sector year-to-date, but it could reassert its leadership if $DXY continues below $108 in the coming weeks.

The Takeaway: The US Dollar ($DXY) closed slightly below $108 today after reversing sharply lower yesterday. If $DXY continues below this key level, Tech stocks could get their groove back.

We've discussed this all year. What's the catalyst to send stocks and other risk assets ripping in the first half of the year? It's the U.S. Dollar. I continue to be impressed with just how resilient stocks have been, despite the Dollar's relentless bid over the past 4-5 months. And now here we are, with so many people crying all weekend about something they call "tariffs", and they're slamming the Dollar. It's all happening right at the 61.8% retracement of the entire '22-'23 decline. Do you think that's a coincidence? I do not.

​

When it comes to the stock market, we always like to do a sum-of-the-parts analysis, whether it's the S&P500, or Dow Industrials or NYSE components. We call it market breadth. We go through the exact same process in forex markets. If you think that the US Dollar is going to fall, sending stocks and other risk assets souring, then you'll need to see a bid in other forex markets. We can go one by one if you want. But I brought 2 important ones with me that I think are about to rip, confirming the US Dollar weakness. Here's the Canadian Dollar breaking below former support, and quickly reversing all those losses. This is a classic reversal pattern. So if you're bearish the US Dollar (and bullish stocks), you're looking for upside follow through here in CAD:

​

Every time the Canadian Dollar has gotten down to these levels over the past decade, they've come in and bought them. Is this time like those other times? I think it is. And we're seeing something similar in Brazilian Real. You see that break below the Covid lows, and then a quick reversal? From failed moves come fast moves in the opposite direction, is how I learned it. I think the BRL is set up to do exactly that.

​

How do you think risk assets are doing if the Brazilian Real is ripping this year? I got a text message from Steve yesterday, "Bro, Dollars getting slammed. What goes up the most if dollar gets wrecked?" In this text he's asking me as a joke. Him and I both know that he very much knows the answer. Here's what he's watching and why...

From Steve.... I think it's impossible to have enough exposure to China right now. I absolutely love the setup over there. Chinese equities have seen a relentless bid in the face of all this trade war news over the last few weeks. A couple of months ago, we put a bullish bet on the iShares China Large-Cap ETF $FXI. Our calls more than doubled in value, allowing us to lock in gains and ride the remainder risk-free. Today we’re adding more long exposure, extending our time horizon, and giving this trade some extra time and space to play out.

​

While FXI has spent the past two months in a corrective phase, price is back at the upper bounds of this reversal pattern. A breakout here will confirm a new uptrend is underway. I think it is coming any day now. Let’s get long more calls in anticipation of it.

Already long FXI.

Bessent:

Mega Hedge Fund Launches Are Rare — and Don’t Ensure Lasting Success

Treasury Secretary Scott Bessent’s Key Square is one of a handful of supersize launches that has stumbled.

www.institutionalinvestor.com

Porno:https://daringfireball.net/2025/02/hot_tob_hardcore_porno_app_eu

jog on
duc

 

[divs4ever]

interesting

i bit the bullet and bought a few CNEW yesterday ( higher than i would have liked ... but have some now )

 

[ducati916]

Autonomous labor (robots + AI) as good as the average human at all types of work will be ready by 2024…that’s all jobs. That is half the US labor wage bill - $10 trillion annual addressable market.


Right now it costs ~$100/hour to deliver basic labor via autonomous labor. That will soon be $50/hour. We think we can have high quality general work at all jobs at $5/hour by 2030.


The above quote comes from 'Sanctuary's CEO on AI".

The thing is this: a debt based economy cannot have 'deflation'. If jobs are being replaced by AI in this sort of meaningful way, there will be a lot of pain.



Full:https://www.rethinkx.com/blog/rethinkx/the-disruption-of-labour-by-humanoid-robots

Innovation at the exponential speed:


“It is why when using a Blackberry phone when the iPhone was released, we couldn’t predict how our minds would change — and our minds changing because of new value created, would change an industry. We move instantly when given something of greater value, and it’s impossible to predict that move before we’ve “seen” it.


And why Kodak was destroyed by the very digital camera that Kodak created, and Blockbuster failed to see the threat of Netflix until it was too late.


And it is the same reason why all monopolies fail when misunderstanding the value creation delivered to society by new technology. Technology adoption is most often bottom-up versus top-down. Why: Simply because the people furthest away from monopoly power have the most to gain, and the people closest to the monopoly have the most to lose.”




Employment becoming an issue:



Trade deficits:



Just adds to the debt.

Musk is cutting peanuts, deficits continue to pressure debt.

Don't have space for the charts but, RRP are pretty much at zero and the drawdown of the TGA has started.

Crisis on the way.

jog on
duc

 

[ducati916]

This will be post #1.

When President Trump demanded lower interest rates two weeks ago, it looked like a return to his 2018-vintage Fed jawboning. But his administration's stance on interest rates now looks more subtle. Why it matters: The new administration seeks to bring long-term interest rates lower, Bessent said yesterday — and Fed rate cuts aren't necessarily the way to achieve that. The Fed controls short-term interest rates, but longer-term rates — which determine the federal government's borrowing costs, as well as home mortgages and many corporate borrowing rates — are set in the open market and reflect investors' expectations of how the economy will evolve. Bessent's case — which is consistent with Trump's recent rhetoric — is that what the economy needs is not further rate cuts from the Fed, but deregulatory and fiscal policies that improve the economy's supply-side potential. What they're saying: Appearing yesterday on Fox Business, Bessent said that the president wants lower rates but that "he and I are focused on the 10-year Treasury and what is the yield of that?" The Fed, he told Larry Kudlow, "did a jumbo rate cut and the 10-year rate went up." The president "is not calling for the Fed to lower rates," Bessent added. "He believes ... if we deregulate the economy, if we get this tax bill done, if we get energy down, then rates will take care of themselves and the dollar will take care of itself." "Now, I've seen, this year, despite the growth estimates going up, 10-year [yields] coming down because I believe the bond market is recognizing that ... energy prices will be lower and we can have non-inflationary growth." "You know, we cut the spending ... we get more efficiency in government, and we're going to go into a good interest rate cycle." The intrigue: When the Fed elected not to cut its short-term interest rate target last week, Trump did not attack the central bank for that non-action. Instead, he slammed the Fed for allowing inflation to take off in the first place. Between the lines: Trump has no compunction about bashing the Fed when it is running monetary policy tighter than he would like, as in 2018. But that is not the current stance of his administration. Bessent's observation that longer-term rates have risen since the Fed began its rate-cutting cycle in September is accurate. One possible factor is that bond investors believe the Fed eased policy more than was justified by economic conditions, which would imply higher rates and inflation in the years to come. It's the inverse of a pattern seen in late 2015 and late 2018, when the Fed raised its policy interest rate but longer-term rates fell, as traders bet that they had made a policy error that risked recession. Of note: Bessent and other Trump allies previously sharply criticized the Biden administration for shifting the Treasury's debt issuance toward shorter-term securities, which they viewed as a politically motivated shadow monetary stimulus. But in the first bond issuance announcement of Trump's term yesterday, the Treasury Department stuck with its Biden-era balance of short-term and long-term debt. That contributed to a drop in longer-term yields yesterday.

Scott Bessent has a fascinating task ahead of him. The new US Treasury secretary must shepherd a package of policies that spurs growth without allowing a return to inflation, and do this even though two keystone Trump 2.0 policies — reducing immigration and levying tariffs — tend to raise prices. His talk with Bloomberg’s Saleha Mohsin, found here, on how he intends to square the circle is worth 18 minutes of your time.

As covered yesterday, Bessent wants to reduce 10-year bond yields, which is hard without financial repression, central bank intervention, or low growth. Already, the Treasury’s first quarterly funding announcement under his watch surprisingly maintained Janet Yellen’s emphasis on issuing shorter-dated bonds, which many complained was distorting the market. “This explains why yesterday’s refunding announcement did not shift Treasury borrowing to longer maturities, as many had expected,” said Steve Sosnick of Interactive Brokers. “It is tough to expect lower long rates while simultaneously increasing supply.” Bessent’s key points to Saleha, as I saw them, were as follows:

Oil: During the campaign, “drill, baby, drill” was presented rather tenuously as a means to bring down inflation. The oil price has a big effect on 10-year inflation expectations, in what has been a durable anomaly — logically, if oil fluctuates and it’s a high price today, the odds increase that it will be cheaper in future and so inflation will fall, but that’s not how the bond market reacts to it. That means that getting oil prices down can theoretically help to bring down the allowance the bond markets make for inflation, and hence bring down yields:


But it’s unclear that this relationship, a quirk of the way traders in TIPS use energy futures as a hedge, can reduce the real weight of borrowing costs on the economy. Real yields suggest that cheaper oil doesn’t directly feed through. That’s logical as cheaper oil should theoretically act like a tax cut, and spur greater spending on everything else — which would be inflationary, and prompt yields to rise:


Another important question: What difference does it make? The oil price is far less important to a far less energy-intense US economy than it used to be — the cost of energy makes up a much smaller share of overall production costs, even at times when prices are high. The share of energy in gross domestic product, graphed here by Absolute Strategy Research, makes the point:


The oil price could double from here and still not inflict anything like the pain wrought in the late 1970s. Still, Absolute Strategy’s Ian Harnett points out that reducing energy prices — particularly as AI may be making the economy more energy-intense again — is “the only way to incentivize the private sector and relevering.” Pushing down the price won’t be easy. Trump’s intention to refill the Strategic Petroleum Reserve, depleted as the Biden administration battled inflation, will increase demand. And Jean Ergas of Tigress Financial Partners points out that OPEC won’t simply stand by as prices drop.

The Dollar: Bessent wants a strong dollar, but that can mean different things. The US has an evident interest in maintaining its status as a reserve currency, labeled by former French President Valery Giscard d’Estaing as “exorbitant privilege.” But the exchange rate of the dollar is different. A strong dollar helps reduce the price of imports — but makes US exports less competitive, and vitiates a key element of Trump 2.0. That raises another question over the oil price. Over history, the dollar and oil have an inverse relationship, because the commodity is traded in dollars. A higher oil price means a weaker dollar. Big oil price falls generally mean rebounds for the US currency. This is what happened in 2014 when the OPEC cartel allowed production to surge:


In 2008, crude oil entered a speculative bubble in the hectic trading that preceded the Global Financial Crisis. It began to crash that July. With the oil price functioning as an exogenous variable — not driven by macroeconomic factors — the result was a rise in the dollar:


For a more intriguing example, return to the early 1980s. After the Iran crisis, crude oil commenced a steady fall in 1981, mirrored by a steady rise for the dollar, which peaked in early 1985. Developed market central banks and treasury ministers agreed to weaken the dollar further in the Plaza Accord. Then oil crashed:


Oil is one of many factors that might contribute to a second Plaza (or Mar-a-Lago) Accord, as it’s hard to see how the various paradoxes in the current situation can be resolved without some kind of intervention in foreign exchange. The world is more complicated now, though, and a grand deal wouldn’t be easy.

Fed Independence: There are plenty of good theoretical and principled reasons to change the Federal Reserve’s current status. Its record over the last quarter-century is wide open to criticism. Trump said on the campaign trail that he thought he should have some say in interest rate decisions. That’s the single Trump policy idea that would most roil markets, and Bessent is doing his job as an experienced markets guy by steering the administration away from it. Any uncertainty over the Fed’s role could drive a market break.

Appointing a successor to Jerome Powell next year who enjoys the respect of the market (i.e. not a talking head ideologue) but would represent a change of direction is a far better option. That would likely achieve all that an attempt to take over the Fed would do, with far less risk. Former governor Kevin Warsh is a widely mentioned candidate to do this. Bessent evidently wants to steer the White House away from a confrontation that could be lethal for its other aims, and that’s wise.

DOGE: Bessent’s task gets much easier if the federal government could somehow spend less. And judging by the praise he heaped on Elon Musk’s Department of Government Efficiency, currently stirring up controversy wherever it goes, he regards it as far more central to the Trump project than it appears, and indeed more important than the oil price. Arthur Budaghyan of BCA Research offers this analogy, with Bessent at the helm of a US economic ship traversing a narrow channel, with the rocks of inflation or recession on either side:

To escape the inflation rocks (i.e., prevent a bond market riot), Bessent needs to persuade Trump and Congress to cut fiscal spending. Critically, fiscal cutbacks should be large enough to please the bond market. However, if the fiscal cutbacks are too large, they will cause the ship to veer off course and crash into the recession rocks. Can the Trump administration cut fiscal spending just enough to bring down US bond yields but not cause a recession?

Budaghyan estimates that federal spending needs to come down by 3.6% if Bessent wants to stabilize the ratio of public debt to GDP. That’s politically infeasible and would need to be passed by Congress. Here is his math:


If Musk and his young helpers can find such cuts without impinging on Congress’ prerogative (an extremely big if), or causing a recession, this math begins to work. That explains why Bessent seemed happy to support the increasingly ugly battle with the established federal government. More than just political theater, his key message is that DOGE — and its central protagonist, Elon Musk — really matters for the key aims of Trump 2.0. Even if they're not currently behaving like the careful navigators in Budaghyan’s analogy. We’d better pay attention.


Oil News:

Brent futures have reversed all their 2025 gains and fallen back to exactly where they started this year after global concerns of a potential US-China trade war became the main talking point of the markets. Whilst Donald Trump’s ‘drill baby drill’ policy has been mainly brushed aside by US oil executives meeting in Houston this week, the US President reiterated his enthusiasm for higher US production, adding another bearish note to the overwhelming sentiment. This sets the stage for a $2 per barrel week-over-week decline and ICE Brent settling in the first week of February slightly below $75 per barrel.

Trump Tightens Iran Sanctions. The US Treasury imposed new sanctions on several individuals and tankers alleged to have been helping Tehran millions of barrels of Iranian crude oil per year to China, in line with US President Trump’s pledge to apply ‘maximum pressure on Iran’ and bring its exports lower.

US Oil Firms Warn of Permian Slowdown. US oil executives have warned the industry that growth in oil production from the prolific US Permian Basin will slow by at least 25% this year, rising by some 250,000 b/d after a 380,000 b/d increase in 2024, playing down the impact of ‘drill baby drill’ policies.

Wary of US Tariffs, Canada Wants Japanese Deals. Ministers from Canada’s Alberta province visited Japan this week to discuss potential ways of creating new exports markets for Canadian LNG in face of a US tariff threat, pitching new investment opportunities beyond the $40 billion LNG Canada project.

Iran Wants OPEC Partners to Defy Sanctions. Iran’s President Masoud Pezeshkian called on OPEC members to stand united against ‘destabilizing’ US sanctions on Tehran, meeting with OPEC Secretary General Khaitam al-Ghais as Tehran assumes the rotating presidency of the organization.

Rising Venezuelan Exports Eye Chinese Market. Venezuelan oil exports rose by 15% month-over-month to 867,000 b/d in January, driven by Chevron’s hefty 294,000 b/d lifting (the highest since it received a sanctions waiver) and higher outflows to the main buyer of Merey barrels globally, China.

Namibia’s Upstream Glory Starts to Fade. Once believed to be the next Guyana, Namibia’s upstream outlook has soured further after TotalEnergies’ (NYSE:TTE) chief executive said the oil major would postpone a final investment decision on its 150,000 b/d offshore Venus discovery by one year to 2026.

Oil Majors Boycott Venture Global. Following last month’s somewhat disappointing IPO of LNG developer Venture Global (NYSE:VG), Patrick Pouyanne of TotalEnergies (NYSE:TTE) said the company rejected VG’s approaches to take up a long-term supply contract from Calcasieu Pass, citing lack of trust.

Colombian President Burdens Ecopetrol. Colombia’s President Gustavo Petro keeps on hurting the stock performance of national oil company Ecopetrol (NYSE:EC), calling for the sale of its US fracking business developed jointly with Occidental Petroleum (NYSE:OXY), its only growing upstream subsidiary.

Egypt Locks in Huge LNG Import Deal. Turning a net importer of natural gas again in 2024, the government of Egypt signed deals worth $3 billion with Shell, BP and TotalEnergies to secure 60 cargoes of LNG to cover power generation demand this year, moving away from quarterly tenders.

European Refining Is No Longer in Vogue. In a bid to cut operational costs by at least $2 billion, UK oil major BP (NYSE:BP) announced it wants to sell its Gelsenkirchen refining site in Germany, concurrently following through with plans to shut one of the refinery’s distillation columns this year.

Tesla Sales in Germany Collapse. US carmaker Tesla (NASDAQ:TSLA) recorded only 1,277 new cars being sold in Germany last month, marking the lowest monthly total since July 2021 and equivalent to a 59% month-over-month decline, with Elon Musk’s political utterances on Germany apparently hurting sales.

TMX Seeks to Expedite New Expansion. Canada’s pipeline operator Trans Mountain is seeking to expedite potential capacity expansion on its 890,000 b/d TMX system, potentially adding 200,000-300,000 b/d as Canadian producers push for alternative evacuation routes that avoid US territory.

India Relaxes Nuclear Laws to Build More Reactors. India’s government has vowed to re-write its dated civil nuclear liability law that holds both plant operators and equipment suppliers liable for damages in case of any incident, seeking to attract private capital as Delhi eyes a 20-fold jump to 100 GW in nuclear capacity by 2047.

The Jobs Report

The U.S. labor market started 2025 — and President Trump's term — in a state of uncanny balance. Why it matters: Unemployment is low and steady, and job growth is chugging consistently forward. It's an environment that allows policymakers at the Federal Reserve and beyond to be patient in deciding what to do next. There is plenty ahead that might jolt the economy for better or worse — trade wars, AI, fiscal policy and more. But January was a month of labor market equanimity. What they're saying: "Employers' ability to maintain a 'business as usual' attitude in the face of political noise, rapid policy adjustments and ongoing geopolitical uncertainty has so far helped the overall labor market — and economy — maintain an even keel over the past few months," Indeed economist Cory Stahle wrote in a note. "But past returns are no guarantee of future results, especially in this fast-moving, often volatile age," Stahle added. By the numbers: The economy added 143,000 jobs in January, a healthy pace — though it does reflect a moderation in jobs growth from the final months of 2024. The economy added a combined 100,000 more jobs in November and December than initially estimated, likely a continuation of the jobs rebound after hurricanes weighed on hiring. Between the lines: With the January report came the Bureau of Labor Statistics' annual revisions, which showed a softer labor market than was previously known. There were more than half a million (589,000) fewer jobs added in 2024 than initially reported. That means the labor market added 166,000 payrolls on average each month last year, not the 186,000 monthly average first estimated. The government also updated population estimates to better reflect immigration rates and an improved methodology. That update increased the size of the labor force by more than 2 million workers. The unemployment rate ticked down to 4% last month, a historically low level. But if you strip out the population adjustment, the jobless rate fell a bit more, by 0.2 percentage point. The intrigue: Perhaps the only sure sign of any lingering heat in the labor market was last month's pop in wage growth. Average hourly earnings for private-sector workers rose 0.5% in January, with a gain of 4.1% over the past 12 months — well outpacing expected inflation. (January's Consumer Price Index is out Wednesday.) Zoom out: The surveys behind the jobs data capture the week just before the presidential inauguration. Therefore, the January report is the best snapshot yet of the labor market that Trump inherited. It was the lowest unemployment rate at the start of a new presidential term since Richard Nixon arrived at the White House in January 1969.

Full:https://www.wsj.com/business/energy...f?st=Q9VyAR&reflink=desktopwebshare_permalink


On investing:https://alphaarchitect.com/2025/01/investor-lessons/

Mean Reversion Strategies:https://www.priceactionlab.com/Blog/2025/01/the-huge-optimization-space-of-mean-reversion/




jog on
duc

 

[ducati916]

Post #2

A sovereign wealth fund of the kind proposed by President Trump, likely funded by debt and primarily investing in domestic assets, violates nearly all of the principles that usually undergird the asset class.

Why it matters: Dani Rodrik, a Harvard economist known for his support for industrial policy and government involvement in markets, tells Axios that this particular proposal "makes no sense at all."

Flashback: The most prominent such fund, 1MDB, ended up collapsing in scandalous ignominy.

• Malaysia wanted a sovereign wealth fund, but it had no sovereign wealth to invest. It therefore created a vehicle, 1MDB, that borrowed money on the international bond markets.
• Most of that money, which was ostensibly invested in domestic development projects, ended up being stolen by government cronies.

Where it stands: 1MDB is the only real precedent for a debt-funded sovereign wealth fund, per Berkeley economist Barry Eichengreen.

• While a U.S. version would not necessarily need to fund itself directly by issuing bonds like 1MDB, ultimately any money flowing into it could alternatively be used to decrease the deficit, therefore it makes sense to think of the fund as directly increasing the deficit and the national debt.
• It exacerbates, rather than addresses, the country's fiscal imbalances, notwithstanding Trump's claim that the fund will "promote fiscal sustainability." The White House did not return requests for comment.

Between the lines: As Axios' Neil Irwin notes, sovereign wealth funds are by their nature prone to suggestions of cronyism, even if the behavior is entirely legal.

• Trump's son-in-law Jared Kushner secured a $2 billion investment from the Saudi Public Investment Fund within a year of leaving the White House and starting out in private equity, leading to accusations that he leveraged his ties to Saudi royalty as a U.S. official into a private sector payday.
• Kushner has not been accused of violating any laws, and rejects the idea he has crossed any ethical lines.

The big picture: The archetypal sovereign wealth fund — think Norway — exists to solve a luxury problem: What should the country do with its windfall oil wealth, given the knowledge that those revenues won't last forever?

• The answer: Instead of spending the money today, it's better to invest it in a diversified set of international assets, so the country's future citizens can share in the wealth even after the oil money runs out.
• The United States, by contrast, doesn't have windfall wealth. Rather, it has a $36 trillion national debt.
• Trump's executive order is extremely vague on where the money might get invested. The president even said, "We're going to be doing something perhaps with TikTok, and perhaps not."

The bottom line: Eichengreen sums it up for Axios this way:

• "Can you say 'recipe for disaster?' Which is the appropriate thing to say even in the absence of cronyism. Of which there is bound to be plenty."

But what if?

Trump revalued US gold? Every $4000/oz = $1 Trillion. Revalue gold to $8000/oz and you have a $2 Trillion SWF.

Retail Stock buying:https://www.ft.com/content/14135d5e-6b50-4767-a9dd-781c268e8366

MSTR trying to find more money to buy BTC:https://www.ft.com/content/b783ddd9-b8f2-4ac0-874c-89e0153ca6c3


Canadian Oil

As Donald Trump wages trade war against his nearest economic neighbours and biggest trade partners, there is one small but significant detail we should briefly ponder. What is the main thing the US actually imports from Canada? No, it’s not fentanyl. It’s crude oil.
I realise dwelling on this might seem a little like a sideshow in the face of the extraordinary events of recent days, but I promise this is worth contemplating. In part because it’s actually rather interesting and counterintuitive. And in part because, well, if you follow this thread far enough, it leads to even more unsettling conclusions.

Now, on the face of it, it’s actually a little odd that America is quite so reliant on Canada for its oil. After all, as is by now quite widely understood, these days the US is a massive oil producer - the biggest in the world. The biggest of all time, even. This is a consequence of the shale oil revolution - arguably the most underrated economic story of the past 50 years.

Having bewailed its enormous energy deficit for decades, America now produces far more oil than it consumes, making it a net petroleum exporter. Yet it continues to suck in vast quantities of Canadian crude.


Indeed, that reliance on Canadian oil has only grown in recent years. Look: right now, Canada accounts for a staggering 61 per cent of all imported oil to the US. That’s a pretty extraordinary degree of reliance (and explains why one of the few concessions the White House has made on the headline 25% tariff rate was for oil, which will face a lower but still significant tariff of 10%).

This outsized reliance on Canada is, it’s worth adding, a relatively recent thing: at the start of Donald Trump’s first term in office, America was importing about the same amount of oil from OPEC members, primarily in the Middle East, as it was from Canada. Up until the imposition of these tariffs, America’s energy story was becoming considerably more North American. Considerably more Canadian. So: why’s this happening?

For the answer, the best place to look isn’t economics textbooks but somewhere else: look instead at the crude oil itself. I mean, literally look at the crude.

Heavy oils
Canadian oil is thick and gloopy. Much of it comes from tar sands and some comes from viscous deposits in the middle of the country. It doesn’t gush; it oozes, a viscous, black substance that’s somewhere between liquid and solid.

The technical term for this kind of oil is heavy oil. It takes considerably more work - more processes and technology - to refine. It’s not easy. And many of the breakthroughs in how you take this heavy oil and refine it into petroleum, kerosene and other products happened in the US, since Californian crude was mostly heavy stuff.

And since this has long been America’s expertise and since America has long been surrounded by supplies of heavy oil - in California, Canada and Venezuela - most American refineries have tended to specialise in heavy oil. This specialisation has actually intensified in recent years: look at crude imports to the US broken down by how heavy they are (the unit of weight of oil is known as API Gravity, and the lower that number is, the heavier the oil).


Look at how the darker segments of the chart have become the dominant type of import in recent years. That’s heavy oil. And, yes, most of it comes from Canada. But crude comes in many different thousands of different flavours and varieties, each one a product of the geological and organic processes which formed it over millions of years. As I wrote in Material World:

Most American refineries are set up for the kinds of heavy, sour crudes you get from Canada, Mexico and Venezuela. That made sense when it looked as if the US was running out of domestic oil, but then came the shale oil revolution. American shale oil, it turns out, is typically light and high quality, meaning it is not best-suited for domestic refineries. The upshot is that while arithmetically America is energy independent – producing far more oil than it consumes – in practice it is anything but. It must keep sucking in heavy oils from elsewhere to feed its refineries while sending Texan crude off to Europe and Asia to be refined.

Here, courtesy of this fascinating piece from Business Insider is what some shale oil from the Dakotas looks like.

Light oils from shale

Not only is it a lighter colour than the black stuff in Canada, it’s far less viscous too. It flows more like water. And since light oil is usually much purer when it comes out of the ground, it’s very different to refine. You don’t need all the clever technologies they have in American refineries. Indeed, American refineries simply aren’t equipped to deal with oils with an API gravity lighter than 30. And it turns out this is most of the stuff coming out of the US right now.



US crude production by gravity. Note how the heavy stuff is stagnating while the light stuff (the lighter colours on the top) are growing. That’s the shale oil

There’s a crucial irony here. While, statistically at least, the US is energy independent, producing far more crude oil than it needs, the variety of crude it produces isn’t compatible with its refineries, and hence it gets shipped off elsewhere and the US remains reliant on the rest of the world for that heavy oil.

Now, in the long run it’s not unfeasible that the US could begin to refit its refineries so they’re compatible with domestic shale oil. But up until now no-one thought that was worth doing because a) it’s very expensive b) it would take a long time and c) anyway, the US industry makes comparatively more money today from importing comparatively cheap oil (the heavy stuff sells for less) and selling their expensive, light oil overseas.


A refinery. Strictly speaking this one is in the UK. Bonus points for anyone who can identify which refinery…
So, in the short run at least, the US will remain dependent on thick, gloopy heavy oil from elsewhere around the world. And since Donald Trump has decided to put 10% tariffs on Canadian heavy oil, the thick gloopy oil is about to become considerably more expensive which, all else equal, will push up gasoline prices pretty quickly.

Casts your mind ahead (no easy task these days), and you can probably imagine at least a couple of possibilities. The first is that the trade war ends about as quickly as it began. That, after all, was what happened with Colombia the other week. But what if it doesn’t? What happens if US refineries need to look elsewhere for their heavy, gloopy oil?

Here’s where things get, well, a little ominous. Because it turns out actually there aren’t all that many countries out there producing enormous amounts of heavy oil. There’s a bit of it in the Gulf - but most of the stuff coming out of Saudi, for instance, is too light for US refineries. There’s a few heavy oil fields in the North Sea (including the controversial Cambo field). But other than Canada, there are really only two other serious contenders for heavy oil production worldwide. Have a look:


Map from here
That’s right: it’s Venezuela, or… Russia.

All of which is to say, the logic of Donald Trump’s plan to slap tariffs on the democracy directly to the north might well be to send him into the arms of two not-exactly-democracies. Raising another question: is it just a coincidence that the president has authorised a hostage handover with Venezuela? Come to mention it: what does this all spell for negotiations with Vladimir Putin over Ukraine?

All rather unsettling. And a reminder that often it’s quite enlightening to look at the world not from the top down, but from the vantage point of the materials we need for civilisation.


jog on
duc

 

[ducati916]

Post #3

Summary of last week.

Copper is on track for a perfect week, rallying +4.2% over the past four sessions. It closed at a three-month high of $4.46 per pound today. Eric points out that it looks ready to push higher after refusing to break horizontal support and its 200-Week Moving Average. It's coiled tightly and testing a nine-month downtrend line. Last May, Copper suffered from a Failed Breakout at an all-time high of $5.00 before sliding -22.2%. However, it could retest all-time highs if this falling trendline breaks. The Takeaway: Copper has caught a bid this week after respecting support. If it breaks the falling trendline from the peak, it could revisit the all-time highs above $5.00 in the coming weeks.

• The last two weeks have been eerily similar. The S&P 500 ($SPX) gapped lower on Monday, rallied throughout the week, and sold off on Friday. However, it only fell -0.2% this week, versus -1.0% last week.
  
• Since December, $SPX has been in a messy consolidation phase. While the index has stalled over the past two months, the percentage of AAII Bears has climbed to 42.9% -- its highest reading since October 2023.
  
• Duality also points out that the Equal-Weight Consumer Ratio ($RSPD/$RSPS) has broken out to all-time highs over the past two months.
  

The Takeaway: While the S&P 500 has been in a choppy consolidation phase over the past two months, sector rotation has been healthy, and bearish sentiment has risen to its highest in over a year.











jog on
duc

 

[ducati916]

For next week:

From JC:

It's hard to imagine what it is that these investors are all so bearish about. I mean, we're in the middle of a bull market, where we know historically it pays way better own stocks than to be selling them. We know. We have the data. And yet, accordingly to the latest AAII survey, more individual investors are bearish over the next 6 months than at any point since November of 2023. Here's what stocks have done since then:

​

These are historic returns that have rarely been seen throughout stock market history. It's been practically straight up. The S&P500 is up almost 40%, while the Nasdaq100 is up over 45%. Financials and Communications are each up over 50%.Consumer Discretionary, Industrials and Technology are also major leaders during this period. You see, stocks don't go up or down in price based on "fundamentals". Prices move based on positioning. And when individual investors are all bullish, it's probably a good time to be selling. More importantly, and definitely more actionable, is when individual investors are bearish. That's historically a great time to be buying very aggressively. These are the worst investors on the planet, and they're the most bearish they've been since 2023! If you own stocks and are looking for higher stock prices, this is music to your ears. If you're bearish and think stocks are going to fall, well, the dumbest money on the planet certainly agrees with you. I can't imagine what these folks are so bearish about. They likely watch too much news and got caught up in these bull**** headlines about the deepsack or something they're calling "tariffs". As investors, we have a choice. We can follow the news cycle, which is specifically designed to distract you from what is important. Or we can follow price, which is the only truth in this matter, and also happens to be the only thing that actually pays anyone. It's up to you. We're taking full advantage of all this unwarranted pessimism and we're buying stocks. It's the only responsible thing to do as an investor. Yesterday alone we had 3 China trades double. Of the 8 China trades we've put on since the election, 6 of them have at least doubled in value, and one of those remaining 2 is already up 50%. This is the type of market we're in.

jog on
duc

 

[ducati916]

1 big thing: A new inflation surge

Data: Bureau of Labor Statistics; Chart: Axios Visuals Inflation surged ahead to start 2025, crimping Americans' buying power and serving as a warning to policymakers — whether those contemplating new tariffs or further interest rate cuts — that price pressures are not yet vanquished. Why it matters: Economic policymakers have described the disinflation process as a bumpy road. The past six months instead look like an uphill path. Prices flatlined last summer but have risen at a 4.5% annual rate over the last three months, far above the Fed's goals and the highest since fall 2022. What they're saying: "There's a déjà vu element here — 2024 also started with a few hot inflation prints that forced a big reassessment of rate-cutting expectations," JPMorgan Wealth Management's Elyse Ausenbaugh wrote in a note. "No matter how you slice the data, the January CPI print marks an unwelcome re-acceleration in prices to start off 2025," Jason Pride, chief of investment strategy and research at Glenmede, wrote this morning. By the numbers: For consumers, the report might just quantify what they have experienced in grocery stores — especially in the egg aisle, where prices rose 15% in January, with a 53% price gain over the past year. The CPI's overall monthly gain was the largest since the summer of 2023, pushed up in part by the biggest rise in grocery prices in almost three years. There were also outsized price increases in January for used vehicles (up 2.2%), prescription drugs (2.5%), hotels (1.7%) and auto insurance (2%). Between the lines: Core CPI, excluding volatile food and energy, also moved in the wrong direction, ticking up 0.4% in January. On a three-month annualized basis, core CPI rose 3.8%, the highest since last April. The report has at least one silver lining: Shelter inflation is much less alarming, with the overall index up 4.4% over the last year. That's the smallest 12-month gain in three years. Rents rose 0.3% for the second straight month, while owners' equivalent rent — how much it would cost homeowners to rent their own homes — rose by a similar amount. Yes, but: Inflation data can be volatile in January, when companies tend to implement price increases. Even so, further progress on inflation has been stalling for months. The seasonal adjustment process may be exaggerating January inflation, due to the lingering effects of earlier inflation surges on the adjustment process. The economic backdrop, however, remains favorable: The labor market is strong with steadily rising pay — an outcome that has kept consumer spending strong.

President Biden and a Democratic Congress took power in 2021 with a bold plan to propel the nation out of the pandemic, revitalize American industry and bolster the working class. It was a complete flop with voters. Why it matters: In a scathing new essay on what went wrong with Biden-era economic policy, longtime Democratic economic adviser Jason Furman argues that the last administration was too quick to toss aside traditional economic orthodoxy around fiscal policy and other issues. That has implications for the new administration as well, Furman tells Axios, as the Trump team also rejects elements of mainstream economic thought on trade and tariffs. Catch up quick: Furman, writing in Foreign Affairs, argues that the Biden administration's willingness to run the economy hot — to risk higher inflation in exchange for a turbo-charged rebound from the pandemic — turned out to be a bad bet. He writes that "the administration's desire to avoid repeating the mistakes of 2008 and its infatuation with the hot economy hypothesis cost the economy dearly," as inflation soared in 2021 and remains elevated four years later. The hot Biden-era job market did little to improve Americans' purchasing power, as inflation outstripped higher paychecks. Meanwhile, the manufacturing revival the administration sought "has run up against the problem of crowding out," Furman argues, in which subsidies for semiconductors and green technology have been hamstrung by shortages and higher prices for materials, equipment and wages. High deficits, and the Fed's rate hikes meant to fight inflation, made it more expensive for companies to borrow and drove up the dollar, making U.S. manufacturers less competitive. The result: "The share of workers in manufacturing has continued to fall at the same rate as it did during the Obama and first Trump presidencies," he writes. "Manufacturing output has remained flat, as it has since 2014." The intrigue: The new administration also seeks to create a manufacturing renaissance, though it's focused more on using tariffs, deregulation and pro-business tax policy to achieve it. Furman, who chaired President Obama's Council of Economic Advisers, argues that this approach carries similar risks to those that damaged the Biden economic legacy. What they're saying: "President Trump is at serious risk of running headlong into the painful consequences of his choices," Furman tells Axios. "He has done even more than Biden to ignore economic analysis and trade-offs, whether they are in budgets or relations with our trading partners." "Unfortunately, you cannot simply pretend them away," he adds.

Oil News:

Europe’s TTF natural gas benchmark rose to €59 per MWh ($19.50 per mmBtu) this week, the highest continental futures have been since February 2023 after posting four consecutive weeks of gains in 2025.
- This week’s scare has come from meteorologists as average temperatures in Northwest Europe are set to drop below 0 degrees Celsius next week, the lowest in a year, as Arctic air will be trapped over the continent by a shift in the Arctic Oscillation pattern.

- Due to a much colder winter, gas consumption across Europe is expected to increase 17% this month from a year ago, with EU gas inventories rapidly depleting and now only 48% full.

- The weakness of the euro against the US dollar (EUR/USD trading at 1.03) is aggravating the economic effects of panic LNG buying – the pace of LNG imports to Europe in February is already 20% higher than January’s average rate of 380,000 tonnes LNG per day.

Market Movers

- US oil major ExxonMobil (NYSE:XOM) is reportedly considering launching a $8.6 billion petrochemical project in Port Lavaca, Texas, mulling a steam cracker and polyethylene production units.

- London-based mining giant Anglo American (LON:AAL) is moving closer to spinning off its diamond unit De Beers, just as the government of Botswana confirmed it would be keen to increase its stake in the company from the current 15%.

- Brazil’s leading independent upstream firm Prio (BVMFRIO) is reportedly looking to buy Equinor’s (NYSE:EQNR) 60% stake in the offshore Peregrino field, worth some $3 billion, however the company denied any negotiations right now.

Tuesday, February 11, 2025

New week, new Trump tariffs – the momentum coming from Donald Trump’s constant threats has been a boon to oil prices, even if the price movements sometimes contradict macroeconomic assumptions. The 25% tariff on steel and aluminum could be disruptive for global economic growth, further aggravated by the threat of higher inflation keeping US interest rates unchanged for longer, but the market’s kneejerk reaction was once again bullish, sending ICE Brent back to $77 per barrel.

Trump Opens Up New Trade War Front. US President Donald Trump announced 25% tariffs on all steel and aluminum imports into the United States, coming on top of already existing duties, raising concerns that steelmakers from Brazil, Canada, and Mexico could retaliate with reciprocal steps.

Iran Vows to Defy US Pressure to Negotiate. Reacting to Trump’s pledge to exert maximum pressure on Tehran and block its 1.5 million b/d oil exports to China, Iranian foreign minister Abbas Araqchi said Iran would not negotiate under pressure, recalling the US’ abrupt 2018 JCPOA pull-out.

China Deregulates Renewable Power Pricing. China’s economic planning body NDRC announced that prices of on-grid electricity producers from renewable sources of energy will be no longer fixed and will instead be determined by the market from June 2025 onwards.

High Saudi Prices Scare Chinese Refiners. Saudi Aramco (TADAWUL:2222) is set to load 41 million barrels of crude to Chinese refiners in March, down 15% compared to this month’s nomination of 44 million barrels as Asian formula prices were hiked by $2.40-2.50 per barrel to multi-year highs.

Trade Wars Prompt Hedge Funds to Get Bearish. The emerging trade conflict between Washington and Beijing has put an end to four consecutive week-over-week increases in hedge funds’ long positions in crude oil, with net positions down by 18 million barrels in the week ending February 4.

Nippon Steel Curbs US Steel Appetite. As Japan’s Prime Minister Shigeru Ishiba visitedthe United States, steelmaker Nippon Steel (TYO:5401) announced it would seek an investment in US Steel (NYSE:X) instead of an outright purchase after Trump claimed no one could have a majority stake.

Chevron Offshoot to Invest into Venezuela. Amos Global Energy Management, a US upstream startup led by former Chevron E&P boss Ali Moshiri, has agreed to buy Chinese Sinopec’s oil and natural gas interests in Venezuela, eyeing potential gas exports to Trinidad and Tobago.

Activist Investor Raises Hopes of BP Revamp. UK oil major BP (NYSE:BP) reported a 35% drop in annual profits last year as it generated 8.9 billion, but the firm’s stock has been gradually increasing as reports emerged that activist investor Elliott Investment builta stake in the company.

Brazil Eyes Exploration Expansion into India. India’s state-run oil explorer Oil India (NSE:OIL) signed an agreement with Brazil’s deepwater specialist Petrobras (NYSEBR) to jointly bid for oil and gas exploration blocks in the South Asian country after no foreign firms bid in the 2024 licensing round.

US Refiners Bemoan Mexican Crude Quality. Mexican crude imports slumped 40% month-over-month to less than 600,000 b/d just as US Gulf Coast refiners started to shun Mexican heavy grades, with Maya cargoes reportedly having a water content of as much as 6%, six times the industry standard.

Baltic Countries Switch Away from Russian Grid. The Baltic countries of Lithuania, Latvia, and Estonia formalized their switch from Russia’s electricity grid to the European system after disconnecting from the IPS/UPS network that had been working since the Soviet times of the 1950s.

Taiwan Jumps Onto the Alaska LNG Bandwagon. Echoing Japanese politicians, Taiwan’s government has also expressed readiness and interest to participate in the 20 mtpa Alaska LNG project due to its short shipping distance, wary of Trump’s tariffs as Taipei is running a $74 billion trade deficit with the US.

Saudi Aramco Refinery Becomes US’ Largest. Saudi Aramco-owned Motiva Enterprises expanded its Port Arthur refinery in Texas to a capacity of 654,000 b/d, largely by removing operational bottlenecks, and overtook Marathon Petroleum’s Galveston Bay plant to become the largest US refinery.

The North American trade drama is unfolding against a backdrop of diverging economic performance that gives President Trump leverage in the trade war. Why it matters: The two nations are tightly linked by the trade patterns that the White House threatens to blow up. Canada is already on weak footing. Heightened conflict that would disentangle its economy from the U.S. would be a crushing blow. What they're saying: "It's odd to have such a large difference in the two economies as we've seen in the last two years," Doug Porter, chief economist at BMO, tells Axios. The U.S. economy has grown at an annual rate of 2.8% over the last couple of years, versus 1.2% for Canada's economy. The unemployment rate in the U.S. is a low 4%; in Canada, it is 6.6%. Between the lines: It looks like the U.S. economy nailed a soft landing after the inflation shock, but Canada's landing was bumpier. Like much of the rest of the world, Canada's central bank aggressively raised interest rates to squeeze out inflation. But Canadians felt the squeeze, and many homeowner mortgages reset in as little as three years. Other factors are at play: There was no productivity surge in Canada, business investment is stagnant, and the country is not benefiting from the animal spirits behind the AI boom. The intrigue: Canadian monetary policy typically moves in lockstep with that of the U.S. But this time, it cut interest rates sooner, and at a much quicker pace relative to the U.S., to protect its economy. Since June, the Bank of Canada has cut rates by 2 percentage points — a full point above the Fed's cumulative cuts that are now on hold. "Throughout most of the past 20 years, Canada-U.S. interest rates have been fairly similar," Porter says. "It's really unusual to have such a large gap in rates, but these are unusual times." What we're watching: Trump said he would put 25% tariffs on steel and aluminum imports, an announcement that could come as soon as today. It's unclear whether Canada — the overwhelming source of U.S. steel imports — will be subject to these tariffs, even as others remain on hold. If the tariffs go ahead, few nations will be impacted like Canada, which risks losing its biggest buyer if the U.S. ramps up domestic production. That is, at least, what the stock market is betting: Shares of steel producers are soaring. Flashback: The tariffs have shades of 2018, when Trump imposed similar levies on steel and aluminum. Like the U.S., Canada was in the midst of a lengthy economic expansion. Exports of its aluminum fell almost 20% and steel exports dropped by 40%, according to a TD Bank report released this month. Canada's economy continued to grow, though at a slower rate, and unemployment and inflation stayed low.

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