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17 February 2021
Video commentary for February 16th 2021
A link to today’s video commentary is posted in the Subscriber’s Area.
Some of the topics discussed include: bond yield break out globally. that brings forward the decision on yield curve control. Stocks ease, gold weak, copper and oil firm.
Treasury Yields Surge to One-Year High as Reflation Bets Thrive
This article by Vivien Lou Chen, Stephen Spratt and Greg Ritchie for Bloomberg may be of interest to subscribers. Here is a section:
None of this is welcome news for those who bought into U.S. auctions last week. Investors snapped up a combined $68 billion of 10- and 30-year debt at yields more than 10 basis points lower than current levels. This week brings a $27 billion 20-year bond auction on Wednesday.
In the U.K., 30-year yields hit the highest level since March after the country hit a milestone in its vaccination program, supporting calls for easing of social restrictions. Germany’s benchmark yield climbed to levels last seen in June amid a significant slowdown in virus cases.
The selloff was broad, with even Italian bonds — which would typically outperform haven assets such as German bunds when credit spreads tighten and stocks climb — under pressure. The announcement of a new 10-year benchmark bond sale to take place via syndication saw yields also advance five basis points on Monday. Still, demand on Tuesday set a record of more than 110 billion euros ($133 billion).
Buying the dip has always worked in the bond market. The question for many fixed income investors is what will the catalyst be to stem the slide. The stock market has already priced in reflation. The stock market exceeded its 2019 highs months ago and the recovery in the social and industrial segment of the market continues.
Covid Slows Efforts to Ease California’s Historic Port Logjam
This article by Robert Tuttle for Bloomberg may be of interest to subscribers. Here is a section:
Southern California ports are grappling with record ship backlogs because of Covid-19 protocols and sick
dockworkers, and the vessels keep coming.
Twenty-nine more ships are scheduled to arrive and anchor at the ports of Los Angeles and Long Beach in the next three days, according to data provided by Capt. Kip Louttit, director of the Marine Exchange of Southern California. A total of 48 vessels were anchored on Thursday, down from an all-time high of
60 on Jan. 28.
“Goods movement ashore to terminals is inefficient because of Covid protocols,” he said.
California’s biggest ports have become the epicenter of pandemic-driven shipping woes in the U.S. as homebound consumers swamp ports with an influx of goods ordered online from Asia.
Peloton Interactive Inc. said Thursday it’s unable to meet surging demand for its exercise machines because of shipping delays in Los Angeles and Long Beach, warning that profit will be squeezed.
I was chatting with a friend on Friday night who is having difficulty importing containers. It’s not at all for the reason one might think. Getting goods on the ship in China is not an issue. Getting them off the ship in Los Angeles is an altogether different story.
The heavily unionized dock workers sector is not testing people for COVID-19. If one person gets sick, they quarantine the whole shift for two weeks on full pay. That is resulting in mass absenteeism which is creating huge delays in supplies reaching their destination.
It’s a symptom of the wider problem in California which is likely to result in governor Gavin Newsom being recalled. The state is managed for the good of the very wealthy and the union workers. Everyone else is ignored. The closing of schools, delays at the port, looking after government employees but making “essential workers” turn up is acceptable.
By all accounts dock workers will now be allowed to skip the queue and get vaccines in order to clear the backlog of ships within the next months.
Together with inclement weather, supply chain disruptions have the potential to put a dent in 1st quarter earnings for a large number of companies.
Blackouts Cascade Beyond Texas in Deepening Power Crisis
This article from Bloomberg may be of interest to subscribers. Here is a section:
Blackouts triggered by frigid weather have spread to more than four million homes and businesses across the central U.S. and extended into Mexico in a deepening energy crisis that’s already crippled the Texas power grid.
After millions in Texas lost electricity, the operator of the grid spanning 14 states from North Dakota to Oklahoma ordered utilities to start rotating outages to protect the system from failing amid surging demand for electricity.
“In our history as a grid operator, this is an unprecedented event,” the Southwest Power Pool said in a statement Monday.
The brutal cold striking Texas — the capital of the U.S. energy industry and home of some of the world’s largest oil and gas companies — is emblematic of a world facing more unpredictable weather due to the rising impact of climate change. The outages also underscore the growing vulnerability of the grid as the globe moves away from fossil fuels to an all-electrified system increasingly reliant on renewable energy.
The big argument about renewables has been always been cost and reliability. The cost argument has been removed from the discussion over the last couple of years. Economies of scale mean that many wind and solar projects are now viable without relying on subsidies. Unfortunately, there hasn’t been any progress how to ensure base load when the turbines stop turning or the sun isn’t shining.
Temperatures significantly below zero (Celsius) freeze the turbines. That’s why there are rolling blackouts across Texas today and yesterday. They rely on wind to produce a significant proportion of electricity and were in no way prepared for the freezing weather to move this far south.
I arrived in Dallas yesterday evening. The car rental place was inundated and understaffed with about four inches of snow on the ground. The restaurants are not getting deliveries so most are closed. The super markets are all also closed. It’s a good thing the weather is expected to improve by the weekend or there will be a lot of hungry people as well as being cold.
Eoin’s personal portfolio – stop triggered on hedge position
One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change.
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