This is the first of a regular weekly round up of what has caught our eye during the week. As ever we need to remind ourselves “Why are we seeing this now?” – there is very often a hidden narrative, a nudge from the nanny state or plain old misinformation.
To quote George Orwell who is getting a lot of attention these days
"Journalism is printing what someone else does not want printed: everything else is public relations."
Energy and Inflation
The ongoing saga – is Russia the bad guy? Or is the US holding the EU to ransom?
The Kremlin’s ambassador to the EU has called on Europe to mend ties with Moscow in order to avoid future gas shortages, but insisted that Russia had nothing to do with the recent jump in prices. https://www.ft.com/content
The U.S. Treasury is being held hostage by Republican Senator Ted Cruz's efforts to halt a Russia-to-Germany gas pipeline, blocking critical appointments when the federal debt limit remains a pressing issue, White House officials and Democrats in Congress say. https://www.reuters.com/world
Well at least one central banker has got off the “transitional” podium
Inflation running above the Bank of England's target of 2.0% is concerning and must be managed to prevent it from becoming permanently embedded, the bank's governor, Andrew Bailey, said in an interview with The Yorkshire Post newspaper.
"We are going to have a very delicate and challenging job on our hands so we have got to in a sense prevent the thing becoming permanently embedded because that would obviously be very damaging," Bailey told the newspaper.
"Unfortunately, if you look at our last forecast, it is going to go higher, I am afraid." https://www.reuters.com/world/uk
If they hadn’t stopped coal imports from Australia they wouldn’t be having this problem. Plays to their long term aspiration to be independent of external sources of energy. And long term in China means long term.
Chinese coal futures rose to record levels as floods shut dozens of mines and displaced more than 100,000 people, throttling the country’s main source of the fuel for electricity and compounding a global energy crisis. https://www.ft.com
Supply chain issues
Anecdotally – in the UK – we hear from fund managers that CEOs are telling them that supply chain issues aren’t getting any worse. Balance that with the quote below from the Maersk head of global ocean networks who suggest that they are.
Ikea, the Swedish furniture giant, says it expects the disruption to global supply chains to continue for at least another year.
Chief executive Jesper Brodin said while there had been some improvement, there was still congestion at ports which has led to supply problems.
"We need to live with disturbances for the year to come," he said.
The owner of Poundland has also predicted that pressure from supply chain problems will last into 2022. Andy Bond, chief executive of PepCo, which owns Poundland, said that its shipping costs had soared.
"There are some times where we have had to pay 10 times our normal rates," he said. "That's not to say every day but that has been the impact."
Mr Bond said the retailer had good levels of stock for Christmas and did not expect to increase prices to cope with rising shipping costs. But he said:
"I think that we see the next 12 months remaining challenging." https://www.bbc.co.uk
Maersk, the world’s largest container shipping company, is diverting big vessels away from the UK because the nation’s main port is rammed full of containers. The Danish group has started to reroute huge ships away from Felixstowe, which handles 36 per cent of the country’s containerised freight, instead discharging UK-bound cargo in Europe for smaller vessels to transport to the island nation.
Lars Mikael Jensen, head of global ocean network at Maersk, said the truck driver shortage meant it was taking longer in the UK, relative to other countries, to get fully loaded containers moved away from ports and to return the empty ones for pick-up. https://www.ft.com
Xi Jinping expected to snub UK summit on climate crisis
China is pursuing its own energy policy (and on pretty much everything else too!) so Xi doesn’t need to come to COP 26 does he?
In case you didn’t know – I didn’t – The word ‘COP’ stands for ‘Conference of the Parties’. In the climate change sphere, ‘the Parties’ are the governments which have signed the UN Framework Convention of Climate Change (UNFCCC). The COP brings these signatory governments together once a year to discuss how to jointly address climate change.
The conferences are attended by world leaders, ministers, and negotiators but also by representatives from civil society, business, international organizations, and the media. AKA the “great and the good” and a great opportunity for more virtue signalling.
The COP is hosted by a different country each year and the first such meeting – ‘COP1’ – took place in Berlin, Germany in 1995.
The Chinese leader won’t attend Cop26, the prime minister is told. President Xi previously attended the Paris climate summit in 2015, where limits on warming were agreed. Boris Johnson has been told that President Xi of China will not attend next month’s critical climate change conference in Glasgow amid international pessimism that the event will be successful. In a setback to the ambitions of the Cop26 summit, the prime minister has been advised by diplomats that Xi is not expected to join more than a hundred other world leaders, including President Biden.
The Queen expressed concern yesterday that it was unclear who would be attending. In comments caught on microphone (how did that happen??!!) at the opening of the Welsh parliament, she said:
“I’ve been hearing all about Cop . . . still don’t know who is coming . . . no idea.” She added: “We only know about people who aren’t coming” https://www.thetimes.co.uk
Brussels urged to prepare contingency plan for UK trade war
Five years on and Brexit is still not a done deal
EU countries want European Commission to be ready if Britain suspends key part of Brexit deal Europe’s Brexit negotiator Maros Sefcovic, above, will hold meetings with his UK counterpart Lord David Frost in Brussels on Friday.
Leading EU member states are pressing Brussels to draw up tough retaliatory measures should the UK carry out its threat to suspend trading arrangements for Northern Ireland enshrined in the Brexit deal. Representatives of five member states on Monday met European Commission vice-president Maros Sefcovic, the EU Brexit negotiator, to demand he come up with contingency plans for a possible trade war, diplomats have told the Financial Times. https://www.ft.com
SEC Set to Allow Bitcoin Futures ETFs
Amazing that the SEC can authorise an out and out speculative product yet continue to allow the investment banks free reign to flaunt the rules let alone three Federal Reserve Bank FOMC members front running their own deliberations…
The Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading in a watershed moment for the cryptocurrency industry, according to people familiar with the matter. The regulator isn’t likely to block the products from starting to trade next week, said the people, who asked not to be named while discussing the decision.
Unlike Bitcoin ETF applications that the regulator has previously rejected, the proposals by ProShares and Invesco Ltd. are based on futures contracts and were filed under mutual fund rules that SEC Chairman Gary Gensler has said provide “significant investor protections.” https://www.bloomberg.com
New Paradigms in Valuations:
We never learn. Never.
Here’s a very interesting line
“Are the traditionalists being too cautious? Some well-known Ben Grahamites, after all, considered the market fully valued as far back as two years ago. Clearly, something is going on that the old analytical concepts cannot account for.”
That comes from an article in 1987. You heard the same things during the dot-com bubble, and very similar words more recently.
Source: Today in 1987! The curse of the front page. He was right…eventually.