Monday, July 12, 2021

Morning Note: Bullish Themes -- And -- Redistribution Is Cyclical Phenomena

Four quotes from my weekend reading:
"U.S. Treasury Secretary Janet Yellen signaled she’ll prod multilateral development banks to rein in their lending for fossil fuels, part of a global effort to make the financial system greener. 
The remarks reflect an effort by finance ministers and central bankers around the world to push lending institutions to support goals for slashing greenhouse-gas emissions and stop money flowing into projects that add to pollution."

"Euro-area banks are falling short in how they assess and analyse climate-related risks, European Central Bank President Christine Lagarde said. Nine of 10 lenders only partially meeting the central bank’s requirements. She vowed to increase the ECB’s analytical work in modeling and assessing climate risk -- for example by including carbon prices and climate policies in its economic forecasting.

“While transition costs may be higher in the short term, they are much lower in the long run than the costs of unrestrained climate change,” Lagarde said. “Without further climate policies, the most vulnerable 10% of banks may see a 30% increase in the average probability of default of their credit portfolios between now and 2050.”"

"BlackRock Inc. Chief Executive Officer Larry Fink says the World Bank and International Monetary Fund are outdated and require a total overhaul if they’re to marshal the trillions of dollars in investment needed to bring sustainability to the developing world. Focusing on their role as financiers instead of lending money would be more useful in the transition to clean energy.

“There is private capital that can be mobilized for the emerging markets, but we need to rethink the way the international financial institutions can support low-carbon investments at scale,” he Fink said. “We need a financing system that isn’t built around bank balance sheets.”"


"European Central Bank President Christine Lagarde told investors to prepare for new guidance on monetary stimulus in 10 days, and signaled that fresh measures might be brought in next year to support the euro-area economy after the current emergency bond program ends.

Speaking to Bloomberg Television days after the ECB raised its inflation goal to 2% and acknowledged it may overshoot the target, Lagarde said the July 22 Governing Council session -- previously expected to be relatively uneventful -- will now have “some interesting variations and changes.”"

Long-term bullish themes implied in the above: Energy (traditional [reduced production capacity outside OPEC] -- and renewables!)... Copper, etc. (the metals, the materials, and the miners)... Emerging market equities... Eurozone equities...

Asian equities traded mostly higher overnight, with all but 2 of the markets we track closing in the green (3 were closed).

Europe's green so far this morning as well, with all but 2 of the bourses we follow trading higher (3 are also closed) as I type.

U.S. stocks are mostly (save for tech) lower to start the week: Dow down 27 points (0.08%), SP500 down 0.04%, SP500 Equal Weight down 0.32%, Nasdaq 100 up 0.20%, Nasdaq Comp up 0.11%, Russell 2000 down 0.69%.

The VIX (SP500 implied volatility is up 3.09%. VXN (Nasdaq 100 i.v.) is down 3.49%.

Oil futures are are down 1.37%, gold's down 0.54%, silver's down 0.19%, copper futures are down 0.97% and the ag complex is up 0.62%.

The 10-year treasury is up (yield down) and the dollar is up 0.11%.

Led by ALB (lithium miner), solar stocks, ag futures, wind stocks and Eurozone equities -- but dragged by KRBN (carbon credits), Viacom/CBS, oil services stocks, base metals futures and bank stocks -- our core portfolio is off  0.25% to start the session.

In our latest video commentary I made the comment that, after 40 years, labor has become paramount over capital. And while opposing groups will assign the blame or the credit to politics, know that this has been cyclical phenomena throughout our history:

"Periodically the land gets itself redistributed, legally or not, whether by the Gracchi in Rome, the Jacobins in France, or the Communists in Russia; periodically wealth is redistributed, whether by the violent confiscation of property, or by confiscatory taxation of incomes and bequests.  Then the race for wealth goods and power begins again, and the pyramid of ability takes form once more..."  --Will Durant; The Story of Civilization

Have a great day!

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