Agriculture
Everyone depends on the cocoa flowing, so they might be fighting, but they still want a piece of the action, so they’re not going to stop their cocoa flowing. I mean, we might go into this bizarre situation where cocoa companies start putting in more cocoa in chocolate, just to use it up! What that basically means is that we have generally quite a good level of production of cocoa, OK functioning cocoa system, but now we’re entering the crunch point.
Q: It has been a crazy year for cocoa prices already… Crazy year for prices for sure. It certainly might be the case that if prices go down to a certain level the smart cocoa companies will buy and stock up. Q: So, going into H2, is it Covid or global demand that will impact cocoa prices the most? Confectionary demand is down, meaning cocoa demand is down. In addition, potentially some of the parties opposed to Ouattara in cocoa growing areas could impose blockades or blocking roads/blocking supplies.
I think the bottom line to make here is that everyone depends on the cocoa flowing, particularly in Ivory Coast, but it goes for Ghana as well. You might find chocolate that used to have 4% cocoa will go up to 8% or something like that.
Q: It has been a crazy year for cocoa prices already… Crazy year for prices for sure. It certainly might be the case that if prices go down to a certain level the smart cocoa companies will buy and stock up. Q: So, going into H2, is it Covid or global demand that will impact cocoa prices the most? Confectionary demand is down, meaning cocoa demand is down. In addition, potentially some of the parties opposed to Ouattara in cocoa growing areas could impose blockades or blocking roads/blocking supplies.
I think the bottom line to make here is that everyone depends on the cocoa flowing, particularly in Ivory Coast, but it goes for Ghana as well. You might find chocolate that used to have 4% cocoa will go up to 8% or something like that.
Currencies
Given U.S. dollar fundamentals such as extremely low rates and high QE money creation, the fundamentals also signal a long-term decline in the dollar. In simple terms, the dollar is losing value and dollar debasement is driving up the price of gold. I believe the second factor (gains from FX) is also likely given bearish U.S. dollar fundamentals, but this factor may take some time to influence the fund’s price. Historically, this is great for emerging market investors, since those equities rise when the dollar falls and the countries benefit from greater foreign investment.
In FX the dollar was slightly higher ahead of Mr. Powell’s speech which is expected to reaffirm Fed’s commitment to a loose monetary policy. Among the majors, Australia and New Zealand dollar lead the move, and among the emerging markets, the Turkish lira and Indian rupee are the best performing. Since then, the U.S. dollar has been generally strong, which has led to severe underperformance in emerging market stocks.
With Jerome Powell speaking during the trading session on Thursday, it is likely that we will get a bit of a move in the US dollar given enough time. The U.S. dollar appears to have made its peak, and for reasons described in-depth in my recent article (linked above), evidence suggests it is in a long-term bear market. While dollar retention came in at 103%, getting more color on the new logo contribution to ARR growth will have provided some reassurance about MobileIron’s growth momentum.
In FX the dollar was slightly higher ahead of Mr. Powell’s speech which is expected to reaffirm Fed’s commitment to a loose monetary policy. Among the majors, Australia and New Zealand dollar lead the move, and among the emerging markets, the Turkish lira and Indian rupee are the best performing. Since then, the U.S. dollar has been generally strong, which has led to severe underperformance in emerging market stocks.
With Jerome Powell speaking during the trading session on Thursday, it is likely that we will get a bit of a move in the US dollar given enough time. The U.S. dollar appears to have made its peak, and for reasons described in-depth in my recent article (linked above), evidence suggests it is in a long-term bear market. While dollar retention came in at 103%, getting more color on the new logo contribution to ARR growth will have provided some reassurance about MobileIron’s growth momentum.
Metals
Gold prices eased today tracking a muted trend in the international spot gold prices as investors waited for Federal Reserve Chairman Jerome Powell’s address later in the day. They need to see gold at its current high price for an extended period before committing more funds to find more gold. Gold exploration budgets continue to shrink on a global basis, as gold miners suffer from recency bias. Even with the recent volatility in prices, gold and silver remain among the best-performing commodities this year to combat the fallout from the coronavirus pandemic.
The lack of sizable gold discoveries, coupled with rising costs and lower grades bodes for much higher prices. They’ve only started to enjoy a more buoyant market to raise money in the past year as gold prices have come back to life. It is gold, silver, and mining stocks were you can find the best buys to hold as they are outperforming the stock market. Via the Wall Street Journal: A higher cost of production will push gold prices higher.
Silver stocks, like gold stocks, are in a correction phase. There are several fundamental drivers that will help keep gold and silver pushing higher, which I’m going to detail for you below.
The lack of sizable gold discoveries, coupled with rising costs and lower grades bodes for much higher prices. They’ve only started to enjoy a more buoyant market to raise money in the past year as gold prices have come back to life. It is gold, silver, and mining stocks were you can find the best buys to hold as they are outperforming the stock market. Via the Wall Street Journal: A higher cost of production will push gold prices higher.
Silver stocks, like gold stocks, are in a correction phase. There are several fundamental drivers that will help keep gold and silver pushing higher, which I’m going to detail for you below.
Oil
At the beginning of 2020, U.S. oil production was even higher at 12.9 million BPD, so oil production just this year is down by 2.2 million BPD (17%). The global Covid-19 pandemic led to an abysmal second quarter for the earnings of U.S. oil companies, but oil prices themselves staged a recovery during the quarter. I have worked in the areas of oil refining, natural gas production, synthetic fuels, ethanol production, butanol production, and various biomass to energy projects.
less Yesterday, the oil markets closed mixed after the markets confirmed an important drop in crude oil inventories. Production cuts by major oil exporters helped offset a stuttering recovery in oil demand. The movement would save some money and guarantee some liquidity to face the lack of oil demand and the new level of oil prices. (OIL, uGA) West Texas Intermediate crude oil futures gained 0.09 percent during the session, closing at the 43.39 level. Palm oil (Indore) today was quoted at ₹870-72, while palm oil (Bombay) ruled at ₹830.Amidst weak availability, mustard seeds (Nimar) today was quoted higher at ₹4,650-75 a quintal.
But major oil producers like ConocoPhillips and EOG Resources are still respectively down 42% and 49% year-to-date, a significant under-performance when measured against the oil price decline. Much of the oil drilling industry will likely remain shuttered for a while but the storm has not produced any catastrophic damage and oil was steady around $43/bbl.
less Yesterday, the oil markets closed mixed after the markets confirmed an important drop in crude oil inventories. Production cuts by major oil exporters helped offset a stuttering recovery in oil demand. The movement would save some money and guarantee some liquidity to face the lack of oil demand and the new level of oil prices. (OIL, uGA) West Texas Intermediate crude oil futures gained 0.09 percent during the session, closing at the 43.39 level. Palm oil (Indore) today was quoted at ₹870-72, while palm oil (Bombay) ruled at ₹830.Amidst weak availability, mustard seeds (Nimar) today was quoted higher at ₹4,650-75 a quintal.
But major oil producers like ConocoPhillips and EOG Resources are still respectively down 42% and 49% year-to-date, a significant under-performance when measured against the oil price decline. Much of the oil drilling industry will likely remain shuttered for a while but the storm has not produced any catastrophic damage and oil was steady around $43/bbl.
United States
Fed officials have already signaled they are ready to adopt a new approach of making up for periods of low inflation by seeking subsequent periods of higher inflation. In its statement, the Fed also said its decisions would be informed by its assessment of “.” The change de-emphasizes previous concerns that low unemployment can cause excess inflation. Historically, the global bond market has generated higher return with less volatility than the US bond market.
Between January 1987 and July 2020, the US bond market and hedged global bond market both averaged very low correlations to the S&P 500, at 0.09 and 0.05, respectively. Signs of Fed willingness to let inflation overshoot its longstanding 2% target may also be feeding these perceptions. The Fed may end its decades-long policy to limit inflation to 2%, instead allowing it to rise higher for longer. Additional remarks from the Fed Chair Powell speech like stating how the ‘inflation overshoot will be moderate’ could have catalyzed the round-trip by markets.
It’s weird, but talking about higher inflation is the Fed’s way of aiming for a stronger labor market. Similar inflation fears arose in the aftermath of the GFC, when the Fed’s quantitative-easing (QE) initiatives also drove sharp gains in money supply growth. Furthermore, the Fed has been undershooting its existing 2% inflation goal for a long time, so what’s the value in aiming higher?
Between January 1987 and July 2020, the US bond market and hedged global bond market both averaged very low correlations to the S&P 500, at 0.09 and 0.05, respectively. Signs of Fed willingness to let inflation overshoot its longstanding 2% target may also be feeding these perceptions. The Fed may end its decades-long policy to limit inflation to 2%, instead allowing it to rise higher for longer. Additional remarks from the Fed Chair Powell speech like stating how the ‘inflation overshoot will be moderate’ could have catalyzed the round-trip by markets.
It’s weird, but talking about higher inflation is the Fed’s way of aiming for a stronger labor market. Similar inflation fears arose in the aftermath of the GFC, when the Fed’s quantitative-easing (QE) initiatives also drove sharp gains in money supply growth. Furthermore, the Fed has been undershooting its existing 2% inflation goal for a long time, so what’s the value in aiming higher?
China
Futures for U.S. stocks indexes dipped over rising tensions between Washington and Beijing. On Tuesday, Beijing objected to flyovers by a US spy plane. Beijing said they demonstrated the PLA’s ability to .
Europe
However, everyone talks about the ECB keeping the rates negative – false, it only keeps one below zero. When talking about interest rates, few traders are aware that the ECB sets three, not one interest rate. On top of that, the ECB uses the national central banks in each member state to implement its decisions, but the economic differences between countries are huge. This upcoming September marks one year since the ECB changed its interest rates. EU trade commissioner Phil Hogan is stepping down amid growing criticism that he broke COVID-19 guidelines in his native Ireland.
The European Central Bank (ECB) is one of the closely watched central banks in the world. German Foreign Minister Heiko Maas, who hosts EU counterparts in Berlin today, said the bloc may expand a blacklist of Belarusian officials beyond the 15 to 20 initially planned. Personnel issues aside, the EU is making progress on its bid to make Europe the world’s first climate-neutral continent.
The ECB learned that negative rates lead to higher risk-taking by banks. The EU puts out one fire as another arises.
1 The European Central Bank (ECB) is one of the closely watched central banks in the world. German Foreign Minister Heiko Maas, who hosts EU counterparts in Berlin today, said the bloc may expand a blacklist of Belarusian officials beyond the 15 to 20 initially planned. Personnel issues aside, the EU is making progress on its bid to make Europe the world’s first climate-neutral continent.
The ECB learned that negative rates lead to higher risk-taking by banks. The EU puts out one fire as another arises.
