Tuesday, January 4, 2022

Morning Note: The Weather and the Windfall

In Part 4 of our 2021 year-end message we stated the following with regard to our position in DBA (ag futures ETF):

"...when you consider the prospects for inflation, the potential for a weaker dollar going forward, continued global supply bottlenecks, rising geopolitical risks, and the seemingly never-ending preponderance of surprising and severe weather disruptions these days (not to mention everybody's gotta eat), having our client portfolios exposed to the price of food makes as much sense as any position we presently have on."

Here's from Bespoke Investment Group this morning on soybeans, and on the weather in Brazil:

"...front-month soy beans are trading at the highest since August on the CME amidst fears that a hot and dry summer in southern Brazil will hurt the bean crop there."

With regard to the price of other stuff of late, here's from Part 2:

"The bars in the top two panels track the amount of direct-to-consumer government payments made for the 12 months to April of this year. The bottom panel represents wages and salaries across the US workforce:

So, $300 billion net wages lost, replaced by $1.5 trillion of government transfer payments!

Make no mistake, you replace lost income among consumers at a 5 to 1 ratio, and, indeed, you're going to see the kind of spending that would create severe bottlenecks, with or without a global pandemic hitting supply chains."

The above said (re-said), we nevertheless anticipate a natural cooling from recent (rate of) inflation levels as we move into 2022. Structurally-(longer-term)-speaking, however, we see inflation as a thing (not necessary a linear thing, mind you) for several years to come.

Asian equities mostly rallied overnight, with 11 of the 16 markets we track closing higher.

Europe's green nearly across the board this morning as well, with all but 1 of the 19 bourses we follow trading up as I type.

US major averages are mixed: Dow up 295 points (0.80%), SP500 up 0.26%, SP500 Equal Weight up 0.77%, Nasdaq 100 down 0.64%, Nasdaq Comp down 0.60%, Russell 2000 up 0.06%.

The VIX is sits at 16.92, up 2.05%.

Oil futures are up 1.58%, gold's up 0.47%, silver's up 0.50%, copper futures are up 0.88% and the ag complex is up 0.74%.

The 10-year treasury is down (yield up) and the dollar is up 0.01%.

Led by MP (rare earth miner), energy stocks, ALB (lithium miner), bank stocks and metals miners -- but dragged by AMD (chip maker), solar stocks, healthcare stocks, wind stocks and Nokia -- our core portfolio is up 0.72% to start the session.

True on many fronts:
"If we can focus on making clear what parts of our day are within our control and what parts are not, we will not only be happier, we will have a distinct advantage over other people who fail to realize they are fighting an unwinnable battle."
--Holiday, Ryan; Hanselman, Stephen. The Daily Stoic 

Have a great day!

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