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Comments of the Day
15 January 2021
Video commentary for January 14th 2021
Eoin Treacy’s view
A link to today’s video commentary is posted in the Subscriber’s Area.
Some of the topics discussed include: financial repression and bond yields, megacaps susceptible to additional weakness, small caps, Europe, Japan, emerging and commodities continue to outperform, gold stable, bitcoin pauses at $40K.
Email of the day on financial repression:
Thanks so much for the terrifically informative analysis that you continue to provide. The quality of your work is simply jaw dropping at times. But I wonder if you could please clarify one thing. Would you mind defining more clearly what you mean by the term “financial repression”? I can certainly search this, but I’d like to know what it means to you.
Eoin Treacy’s view
Thank you for your kind words and I’m delighted you enjoy the service. The term “financial repression” is emotionally charged because of its historic significance. After World War II the US government paid back its war debt by inflating it away. That was a deliberate policy where interest rates were held at a low level for a prolonged period, taxes were raised and inflation eroded the debt over decades. From an investors perspective it was akin to the government reaching into your pocket and taking your money.
Russia May Raise Wheat-Export Tax, Stoking Grain Supply Worries
This article by Megan Durisin and Yuliya Fedorinova for Bloomberg may be of interest to subscribers. Here is a section:
Russia may almost double a planned levy on wheat exports and impose new restrictions on barley and corn in an effort to curb food prices, heightening supply risks for global grain markets.
Officials in the world’s top wheat shipper will meet Friday to review grain-export duties and may increase a planned tax on shipments to 45 euros ($55) per ton from March 15, a spokesman for the Agriculture Ministry said. That compares with a 25-euro levy approved last month for sales from mid-February through June, as well as a quota on grain shipments.
The moves come after President Vladimir Putin’s call to cool food-price inflation because of sharp increases for staples like bread and sunflower oil last month. The threat of heightened restrictions from a major exporter helped stoke wheat futures in Chicago and Paris, and adds to concerns of crop
protectionism as grain prices rise.
Eoin Treacy’s view
Export restrictions might curb domestic food price inflation but will exacerbate it everywhere else. We are on the front end of significant commodity price inflation. The three most important food commodities are wheat, soybeans and rice. All have completed base formations. No one single factor creates more social unrest than a surge in basic food commodities. The high cost of bread in Tunisia was once of the causal factors in the origin of Arab Spring. Considering the extend of social unrest seen in the last 12 months it is quite likely we are going to see significant unrest in 2021 if food prices continue to rise.
Global Money Dispatch
Thanks to a subscriber for this note from Zoltan Pozsar for Credit Suisse. Here is a section:
Eoin Treacy’s view
A link to the full note is posted in the Subscriber’s Area.
The absence of a credit multiplier helped to keep inflation under wraps for the decade after the Global Financial Crisis. Banks just did not have the ability to lend, even if they had wanted to. Rebuilding their balance sheets was the number one priority. It was a monumental task. New regulations massively increased the burden of compliance and simultaneously denuded banks of some of their most profitable operations. The result is that the sector has been recapitalised but it is now much more risk averse than before.
Eoin’s personal portfolio – stop triggered on hedge position
Eoin Treacy’s view
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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