Comment of the Day
Video commentary for March 31st 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Crude oil eases, gold stable, bitcoin weak, stock markets susceptible to weakness as they pause at their 200-day MAs, Brazilian real breaks, India a beneficiary of lower oil prices,
Russia's Other War of Attrition Is Against Europe
This article by John Authers for Bloomberg may be of interest. Here is a section:
In a provocative but persuasive column for the New York Times, Bret Stephens suggests that Russia’s war aim is not preventing NATO enlargement, or rebuilding the Soviet empire, but cementing its status as an energy superpower:
Suppose for a moment that Putin never intended to conquer all of Ukraine: that, from the beginning, his real targets were the energy riches of Ukraine’s east, which contain Europe’s second-largest known reserves of natural gas (after Norway’s). Combine that with Russia’s previous territorial seizures in Crimea (which has huge offshore energy fields) and the eastern provinces of Luhansk and Donetsk (which contain part of an enormous shale-gas field), as well as Putin’s bid to control most or all of Ukraine’s coastline, and the shape of Putin’s ambitions become clear. He’s less interested in reuniting the Russian-speaking world than he is in securing Russia’s energy dominance.
Even if this is not the aim, the possibility of entrenching Russia’s energy power is now at the center of the broader conflict between Putin’s Russia and the West.
My view - I’ve been arguing from the outset that the idea Russia acted irrationally does not make sense. Securing energy assets now so they can never be used to decrease European natural gas reliance on Russia offers an elegant explanation for the aggression. From their perspective it is better to act now, to forestall the certainty Ukraine energy resources would be developed, and risk destroying a supply relationship than to endure a loss of influence of time.
Brazil Central Bank Tempts Fate on Rates and Traders Follow Suit
This article for Bloomberg may be of interest to subscribers. Here is a section:
The drop in Brazil’s swap rates goes against the move seen elsewhere in emerging markets, with yields rising across the board following the U.S. bond rout. Treasury yields surged recently with traders pricing in more tightening in the world’s biggest economy amid concern about rising prices.
“BCB has raised rates almost 1,000 basis points in two years, so they are certainly willing to fight inflation,” said Brendan Mckenna, a currency strategist at Wells Fargo in New York. “There is little they can do to defend against external shocks, but at some point policy makers have to wait for the effects of tighter policy to materialize.”
Brazil’s policy makers defied analyst expectations when it said that a final 100 basis-point rate hike in May would be enough to bring inflation back toward the 3.25% target next year. The last central bank weekly Focus survey shows economists see consumer prices running at 3.8% next year.
“The central bank was being held hostage of the Focus survey forecasts and now it decided to follow its own views,” said Tony Volpon, chief strategist at Wealth High Governance and a former central bank director.
My view - In the developed world there is no prospect of raising rates to a level above inflation. Everyone understands growth would reverse well before that point is ever reached. Economies are so overburdened with debt that even modest interest rates will kill off demand.
Chinese Stocks in the U.S. Drop as Audit Dispute Drags On
This article from Bloomberg may be of interest to subscribers. Here is a section:
Chinese stocks listed in the U.S. fell Thursday after Securities and Exchange Commission Chair Gary Gensler dialed down prospects of an imminent deal to allow Chinese firms to keep trading on American exchanges.
The Nasdaq Golden Dragon China Index dropped as much as 4.9%, with iQIYI Inc. and Baidu Inc. sinking more than 6% after being added late Wednesday to SEC’s growing delisting watch list. Alibaba Group (NYSE:BABA) Holding Ltd. fell 4.6%, while its e-commerce rivals JD.com Inc (NASDAQ:JD). and Pinduoduo Inc (NASDAQ:PDD). slid more than 7%.
U.S.-listed China stocks have steadied in recent trading after authorities signaled support to overseas listings and financial markets, yet investors remain on edge amid a long-standing dispute over whether American regulators can get full access to U.S.-traded Chinese company audits. In response to the SEC chair’s comments, China said talks with the U.S. accounting
watchdog will continue.
Under the Holding Foreign Companies Accountable Act, the SEC started publishing a provisional list of companies identified as running afoul of requirements with the first
release in early March.
“The growing provision list is a reminder that there’s a risk” and a reminder to do a risk check, TH Capital analyst Tian X. Hou said in an interview, noting that as investors become more familiar with the delisting situation, they will realize this is a routine check by the SEC under the new rules.
My view - Even at the best of times, auditors miss signs of trouble in the balance sheets of companies. They are a regulatory burden designed to ensure companies follow the rules and yet whenever a crisis develops, the conflict-of-interest argument arises because auditors missed obvious transgressions.
Eoin's personal portfolio: equity index long closed at a small loss March 1st
One of the questions subscribers as most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.