David Fuller and Eoin Treacy's Comment of the Day
Category - General

    An Update from Our CIOs: Transitioning to Stagflation

    This blog post from Bridgewater may be of interest to subscribers. Here is a section:

    Today, our indicators suggest an imminent and significant weakening of real growth and a persistently high level of inflation (with some near-term slowing from a very high level). Combining this with what is discounted, the difference between what is likely to transpire in the near term and what is discounted is the strongest near-term stagflationary signal in 100 years, shown below. Longer term, as we play it out in our minds, we doubt that policy makers will be willing to tolerate the degree of economic weakness required to bring the monetary inflation under control quickly. More likely, we see good odds that they pause or reverse course at some point, causing stagflation to be sustained for longer, requiring at least a second tightening cycle to achieve the desired level of inflation. A second tightening cycle is not discounted at all and presents the greatest risk of massive wealth destruction.

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    Here Are All the Ways China's Hitting Back Against Pelosi's Trip

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Before Pelosi landed, China banned food imports from more than 100 Taiwanese suppliers. On Wednesday morning, China’s Ministry of Commerce halted natural sand exports to Taiwan, without elaborating, and customs officials added boycotts to some fish and fruit imports.

    Separately, Chinese organizations, companies and individuals were banned Wednesday from dealing with Taiwan companies including Speedtech Energy and Hyweb Technology, China’s state-run CCTV reported.

    China is Taiwan’s largest trading partner, with bilateral trade of $328.3 billion last year, giving Beijing a strategic advantage. Still, China must tread carefully as it needs Taiwan for semiconductors. 

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    Treasury Yields Surge as Fed Officials Quash Policy Pivot Talk

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Bond yields rebounded after San Francisco Fed President Mary Daly said the central bank is “nowhere near” being almost done in fighting the hottest inflation in four decades. Chicago Fed President Charles Evans signaled that the central bank needs to keep raising rates next year to contain price pressures. Over the weekend, Minneapolis Fed President Neel Kashkari said that there’s “a long way away from” achieving the central bank’s target.

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    Fertilizer Giants Say Supplies Will Remain Tight Amid War

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Fertilizer exports from Russia have largely returned to normal as trade flows have adapted, Bert Frost, CF’s senior vice president of sales, said in a quarterly call Tuesday. But there’s one exception: ammonia.

    “The global nitrogen market is likely to be short the fertilizer it needs if product prices do not incentivize greater production in high-cost regions,” Frost said.

    CF’s cost of natural gas used for production has more than doubled from last year, according to the statement. The company expects its own production to be down in the third quarter due to scheduled maintenance.

    Mosaic Co., a major phosphate and potash company, sees both nutrients staying in short supply. Sanctions on Belarus, a top potash producer, have wreaked havoc on the market. And China has been restricting phosphate exports to keep supply in country.

    The company expects Belarusian potash exports to be down 8 million tons this year, Chief Executive Officer Joc O’Rourke said in a quarterly call Tuesday. Belarus normally exports about 10-12 million tons annually, according to Green Markets data.

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    Pelosi's Roundabout Flight to Taiwan Shows China's Long Reach

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Instead of traveling northeast from Kuala Lumpur directly across the South China Sea -- a journey that might have brought her jet close to Chinese military facilities built on reclaimed land on islets and reefs including in the Spratly Islands -- Pelosi’s plane flew southeast over the Indonesia part of Kalimantan, or Borneo, before turning north and then to the east of the Philippines, according to imagery provided by Flightradar24. 

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    Shale Profits Finally Blossoming After Decade of Steep Losses

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    US shale drillers are expected to post record second-quarter profits in coming days, reversing nearly a decade of debt-fueled losses. 

    The top 28 publicly traded US independent oil producers generated $25.5 billion in free cash flow in the three months to June 30, according to estimates compiled by Bloomberg. In that space of time they’ll have made enough cash to erase one-fourth of what they lost over the previous decade. 

    Fracking revolutionized global energy markets by enabling American drillers to harvest shale resources that had previously been untouchable. In the space of just over 10 years, the US went from a declining crude producer to the world’s dominant oil and gas source, but at an astronomical cost: the 28 companies lost about $115 billion in the decade leading up to the Covid-19 pandemic.

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    From Profits to Pay, JPMorgan's Gold Secrets Spill Out in Court

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    JPMorgan holds tens of billions of dollars in gold in vaults in London, New York and Singapore. It is one of four clearing members of the London market, where global gold prices are set by buying and selling metal held in a few London vaults -- including JPMorgan’s and the Bank of England’s.

    JPMorgan is the biggest player among a small group of “bullion banks” that dominate the precious metals markets, and internal documents presented by prosecutors provided a glimpse of just how dominant a role the bank has played. 

    In 2010, for example, 40% of all transactions in the gold market were cleared by JPMorgan. 

    And

    Another set of important clients were central banks, which trade gold for their reserves and are among the biggest players in the bullion market. At least ten central banks held their metal in vaults run by JPMorgan in 2010, according to documents disclosed in court. 

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