High Energy, High Drama
US investors will step out of the holiday and into a data vacuum in the week ahead. The only major US release is ISM services.
That leaves Fed speak to fill the void, and there's plenty of it on offer. Traders will hear from Tom Barkin, Michael Barr, Lael Brainard, Charles Evans, Esther George, Loretta Mester and Chris Waller.
Oh, and somebody called "Jerome" will speak Thursday to the Cato Institute's 40th Annual Monetary Conference. "With massive US debt and deficits, inflation at a 40-year
Subtle, H. If only there was something in the metaverse to put central bankers, an energy crisis and a land war into the background as well.
It is increasingly hard to see any way out for Europe, unless Putin were to suddenly change his mind (rather unlikely as he is the instigator here), or the war in the Ukraine were to be “resolved” somehow. Something like 40% of Europe’s natural gas comes from Russia. That cannot be replaced by LNG shipments from friendly nations, so what are Europe’s options then? Inflation, recession, and hardship; longer-term investment in alternative fuels and infrastructure (no help in the short-term); or reducing support for the Ukraine in order to gain Russian favor (Putin’s obvious plan here). Is it possible for the EU to waver on the Ukraine while NATO continues to remain stout? Putting boots on the ground in the Ukraine would not improve things either–at least not in terms of energy flows–as the pipeline and its source emanate from deep inside of Russia. To quote George Clooney’s character from “O Brother Where Art Thou?”: “Damn, we’re in a tight spot!”
It’s “Ukraine,” not “The Ukraine.” To me, the obvious answer is not for NATO to put boots on the ground, but for NATO and the rest of the western world to adopt a wartime economic stance to counter Putin. Think about lend-lease to support the UK in 1940-41 before the US was formally in WWII. If the US, Canada, Australia, Japan, South Korea share the economic pain with Europe, then there is no need to “resolve” the situation in Ukraine in a way that is favorable to Putin.
Prince Abdulaziz bin Salman suggested it may be necessary to cut crude supplies in order to fix what Pierre Andurand recently described as a “completely broken” oil futures market.
Maybe someone in the Biden administration should suggest to the Saudis it may be necessary to stop the shipment of F-16 replacement parts to the Saudi air force so long as the Saudis insist on being part of the problem instead of the solution.
As haphazard and objectively dangerous as it most assuredly was, Trump’s foreign policy at times paid dividends, if only by accident. His solution to the Saudi oil problem was just “No, you’re going to pump more oil now.” And Riyadh generally did. Of course, they could also count on Trump and Kushner to shield the Crown Prince from the Khashoggi fallout, and generally run interference on Capitol Hill, which helped immensely. But no White House should have to “ask” MBS for anything. And it’s not just the weapons, although security is obviously a huge part of it. The US could also say something like, “Nice currency peg you got there. Shame if something happened to it.”
I agree, H – the US has a lot of leverage over Saudi, that it seems reticent to use. On the flip side, the US relies on Saudi less and less – in fact, since shale made the US the #1 oil producer, it isn’t clear to me what the US really “needs” Saudi for.
My guess is that we still need the Saudis for two reasons, as a check on Iran’s potential power around the gulf and for the same reason the 49s are keeping Geroppolo as a back up. Our shale fields, while OK now, don’t appear to have nearly as long a life as the Saudi fields, which are also nearing the end of full production capacity.
And meanwhile our spaceship is burning up while humans continue to fight each other on every deck. There’s something dreadfully wrong with homo sapiens wiring and we are about to find out the hard way that Mother Nature is not amused. Apparently she doesn’t suffer fools for long.
As usual, sir, you are spot on. Personally, I don’t think we have all that long, nearly 130 in Socal last week.