Comment of the Day
December 20th 2021
Some of the topics discussed include: stocks markets gap lower but rebound towards the close, oil firms following steep initial selloff, so does bitcoin, gold and bonds ease, Turkey rebounds, Chile sells off. omicron variant is a wild card for China, Hong Kong very oversold.
China cuts benchmark loan rate for first time in almost 2 years amid mounting economic pressures
This article from the South China Morning Post may be of interest to subscribers. Here is a section:
Last week, an influential Chinese think tank said China should lower interest rates and boost infrastructure investment to ensure the economy will grow by at least 5 per cent next year.
China’s year-on-year economic growth is expected to drop below 4 per cent in the fourth quarter of 2021, way down from a 18.3 per cent rise in the first quarter.
The fast decline has fuelled concerns of an economic hard landing, triggering calls for more supportive measures.
“We expect a further 45 basis point of cuts to the one-year LPR during 2022. Just as important is what happens to quantitative controls on credit, including on borrowing by local governments. Early signs are these will be relaxed, but not greatly,” added Williams.
“The overall impression, including from [Monday’s] announcement, is that policy is being eased but not dramatically.”
My view - Capital is both global and mobile. It flows to the most attractive assets and helps to create bull markets. From the beginning of the pandemic until now, there has been nothing to worry about in terms of the supply of capital and liquidity. The big question for 2022 is where will the liquidity come from to continue to support bull markets.
Equinor Wants the World's Last Drop of Oil to Come from Norway
This article from Bloomberg may be of interest to subscribers. Here is a section:
Equinor’s Johan Sverdrup oil field is already fully electrified. It started production two years ago and is expected to operate for more than 50 years. The process of extracting the crude emits 0.67 kilograms (1.5 pounds) of carbon dioxide per barrel, compared with the company average of 9 kilograms. The global average is 18 to 19 kilograms.
Yet Norway isn’t the only country with this idea. Saudi Arabia, leader of the Organization of Petroleum Exporting Countries, also says it wants to pump the world’s last barrel. The carbon intensity of the kingdom’s crude matches that of Equinor, at 9 kilograms a barrel, according to Oslo-based consultant Rystad Energy A/S.
There’s also the question of whether it will remain politically possiblefor Norway to remain as a major exporter of carbon-based fuels even as it implements its own emissions reductions, and strives for leadership in areas such as electric cars. Its neighbor the U.K. is already facing stiff opposition to new oil and gas developments on climate grounds, contributing to the shelving of the Cambo field earlier this month.
My view - Conventional oil wells tend to have lengthy production profiles but even these eventually peak and need to be replaced. For unconventional wells the requirement for fresh drilling is much more urgent because of the steep initial production profile and early peak. The major oil companies are attempting to evolve in an environment where they are going to be judged on their carbon emissions. That’s expensive but ultimately favours the lowest cost producers like Equinor and the GCC.
Bitcoin Chartbook 2022 Is This Halving Cycle Over?
Thanks to a subscriber for this report from Incrementum. Here is a section:
1.Due to its unusual investment characteristics in terms of performance, correlation and volatility, Bitcoin (and selected altcoins) can serve as useful supplement within a diversified portfolio.
2.Gold and Bitcoin are non-inflatable and as such profit from monetary inflation. Together they shine even brighter due to a superior risk/return profile. We are convinced that an increasing number of investors will treat Gold and Bitcoin as parts of one non-inflatable asset class.
3. Most altcoins are not here to stay. However, some projects have the potential to serve as market disruptors and substantially change aspects in our lives. Conceptionally, we consider (most) altcoins more like venture capital investments, whereas Bitcoin to us is digital Gold.
4. Various indicators are signaling a bullish environment for Bitcoin. However, the most relevant model to monitor is the S2F model by PlanB. In this regard, it is our opinion that the current halving cycle is not over yet. Our base scenario is a delayed peak in this cycle. If this assumption is correct, we could see the Bitcoin price pushing above USD 100,000 in the coming months.
My view - As a trend persists, the evidence from past performance swells to make the bullish case more convincing. This is doubly true for bitcoin because despite its history of significant drawdowns no one who has held the asset for four years has sustained a loss regardless of the price they paid. That’s only possible because the trend has been so strong and the breakouts, when they come, have been among the most explosive of any asset ever.
The Chart Seminar 2022
My view - With global vaccination rates rising, the prospect of anti-COVID pills on the horizon and the promise of travel restrictions being dropped, it is time to start thinking about venues for The Chart Seminar in 2022. Please drop sarah@fullertreacymoney.com a line if you would be interested in attending an event next year, as well as your preferred location. At present the two locations with greatest demand are London and Dubai.