In 2021, worldwide, the costs of the ten worst disasters caused by climate change totaled more than $170 billion. It was the fourth time in the last five years that we have suffered that level of damages. Scientists expect next year to be even worse. Insurance companies, like Zurich-based Swiss Re, bear the brunt of the costs of extreme weather. During the last decade, losses have been rising 5-6% per year, according to Swiss Re’s recent analysis. They expect at least one $10 billion catastrophe, such as severe flooding, a winter storm, or a massive wildfire will be part of…
Insights & Advice
Global
The Back-to-Normal Index
“Everything was perfectly healthy and normal here in Denial Land.” —Jim Butcher, “Cold Days” A friend of mine recently came back from a two-and-a-half-week work tour of Europe, where she was trying to raise funds for her private equity fund. I compared her report to my recent two-day trip to New York City (I love New York, but let’s face it – her life is much cooler than mine). In Europe, masks are practically a thing of the past. You go and do what you want, when you want. In NYC, you must show proof of vaccination to get into entertainment…
When will supply chain issues ease?
August 2022. Thank you for coming, everybody. Don’t forget to tip your waitstaff. Oh, you came for more than just the punchline? Well, pull up a chair and listen to me weave an oxymoronic tale of educated speculation. (“Educated speculation” — patent pending on that phrase.) I went to college in the early-to-mid 1990s. Back then, the study of economics was based on Adam Smith’s “invisible hand,” the unseen force that guided our short- and long-run decisions to maximize our financial outcomes. In the 1990s, I was told that I could eat all the candy and bread I wanted and…
The vicious cycle between energy and food prices
Rising prices at the gas pump, combined with soaring shopping bills at the supermarket, are having a noticeable impact on the consumer’s pocketbook. But what’s worse is that higher prices in oil beget higher prices in food in the future. Here’s why. Historical economic studies tell us that energy prices have a significant impact on food prices, with 64.17% of changes in food prices explained by the movement of oil prices. But that only tells half the story. As energy prices climb, inputs to farm production are also impacted. Fertilizers, for example, account for between 33% to 44 % of…
Out of gas
Winter approaches and with it a potential natural gas crisis. Areas of Europe are already scrambling to find the energy required to heat homes and continue their economic rebound. Could the U.S. be next? Over the last year, prices for European natural gas have jumped by almost 500%. Natural gas prices on this side of the pond have also spiked by more than 100% this year. But it isn’t just countries in the Northern Hemisphere that are feeling the scarcity. Parts of Asia, which are importing liquified natural gas (LNG) at record prices, are being forced to switch to coal…
Weather worsens global trade
Changes in climate are impacting a global economy that is fighting to recover from a pandemic. Supply chain bottlenecks continue to worsen as continuous weather-related catastrophes close ports and snarl land, sea, and air transportation routes. Can it get any worse? Yes, and it probably will, according to climate experts. Nearly all actively publishing climate scientists agree that humans are causing global warming and climate change. The less than 2% of experts that disagree have published contrarian studies that either cannot be replicated or contain errors. I’ll go with the consensus on this issue. Here in the U.S., we receive…
Olympic price tag breaks records
After the Olympic games conclude on August 8th 2021, Japan will still be tallying the final cost of hosting the games. Indications are that the final price tag could be more than $20 billion. Was it worth it? The most recent polling data suggest the answer is a resounding “no,” at least as far as the Japanese are concerned. Over 83% of the people polled, who live in Japan, believe the Olympics should not have taken place this week. To the Japanese, it is not just the expense of the games, but the holding of this event while the country…
China’s red hand of regulation
Over the past several decades, investors, investing in China, have gotten used to the dichotomy of China’s Communist-run, centralized government and its free-for-all stock market. That situation appears to be ending. The latest (and most controversial) sign of China’s increased interest in regulating and extending control of its largest companies came over the weekend. Fresh off the heels of a global $4.4 billion initial public offering, Didi, China’s ride-hailing giant, was ordered to cease accepting new users, and to close down its app by China’s internet regulators. By mid-week, the newly, U.S.-listed share price of Didi fell by well over…
The movies return
The Memorial Day weekend launched the unofficial beginning of the summer season. Movie owners are holding their breath in hopes that consumers, once vaccinated, may start to return to the cinema. Is it a false hope? Much has been written about the demise of the movie theater, even before the world was ravaged by the Coronavirus Pandemic. Sky high prices for tickets and the exorbitant costs of concessionary items like $8 bottles of water and $15 baskets of popcorn had made the movie-going experience almost as costly as a rock concert. At the same time, consumers were being offered the…
Pay up
Weekly pay is up 3.9 percent from March 2020 to March 2021, according to the Bureau of Labor Statistics. That may not sound like much. However, before the pandemic, growth rates had ranged from -0.8 percent to 2.9 percent, dating back to January 2011. From January 2011 to March 2020, there were 20 occurrences of zero or negative weekly earnings growth. In contrast, there were only seven occurrences that exceeded 2 percent. Year-over-year growth of weekly earnings since April 2020 has been stellar, averaging 5.1 percent. It’s not uncommon for average wages to grow higher during recessions. Sounds crazy, right? When…
Market rotation continues
One day, it’s all about technology. The next day, back to commodities. And on the third, defensive plays like healthcare shine. Next week, we could see a new player lead the markets higher. The Russell 2000 Index, which is chock full of small cap stocks, has been trading back and forth, but basically going nowhere over the last month. I detected a stirring of upside momentum this week and will be watching that index closely after the Memorial Day weekend for additional follow-through. The small cap universe, (one of my picks to outperform this year) has done “okay” so far…
The carbon market comes of age
At the beginning of this year, the global price of carbon was $24.05 per ton of CO2. In order to achieve the emissions reduction goals of members of the Paris Agreement, prices need to reach a range of $50-$100 per ton of CO2. That makes buying carbon an attractive investment.The ongoing concerns about climate change have spawned several emission trading schemes over the last decade. The reasoning is simple: if left unchecked, carbon emissions (among other factors) will have a material impact on our environment and will do severe damage to the global economy.The ratification of the Kyoto Protocol of…
Fed puts markets on notice while crypto crashes
It had to happen at some point with economic growth spiking as high as it has, and inflation beginning to creep up. Investors should have expected the Fed to think about a change in policy. This week, we had our first mention of the dreaded “T” word. T is for taper and in the minutes of the Fed’s April FOMC meeting released on Wednesday, the entire financial community jumped on just one phrase: “it might be appropriate at some point” to consider tapering asset purchases if the economy shows “rapid progress.” In other words, the Fed is signaling that they…
Gold regains its mojo
In inflationary environments, investors historically have hedged their bets by buying gold. However, this time around, the precious metal has languished as investors bought alternative investments. But times are changing. The primary alternative to buying gold has been cryptocurrencies. Bitcoin and Ethereum, two of my 2021 buy recommendations (for those with a strong stomach) have enjoyed spectacular gains in 2021. Bitcoin, at one point in May, had gained almost 100%, while Ethereum saw gains of more than 400%. In addition, other commodities held more interest than gold for most investors. In January 2021, I recommended investors focus on some specific…
A labor shortage solution
The hiring boom that was expected in April 2021 fizzled. Last Friday’s nonfarm payrolls report came in at 266,000 jobs gained compared to over a million expected. It was the biggest miss in decades. Politicians and many corporations were quick to provide a ready scapegoat for that failure. They blamed it on the weekly payments of $300 in federal unemployment aid through September 2021, on top of the regular unemployment benefits paid out by the states. In short, the fault apparently lies with the Biden Administration’s stimulus package. If the president and the Democrats had not provided these overly generous…
Are Inflation fears real or imagined?
If you have been grocery shopping lately, there is no question that prices and inflation are going higher. The same can be said for the price of a gallon of gas. But is it a transitory event, or are we at the beginning of an inflationary era not seen in decades? Clearly, commodity prices, which are usually the harbinger of future inflation, are soaring. Copper, oil, sugar, corn, steel, aluminum and lumber, as well as many other food and material prices, are hitting multi-year highs. But it is not just commodities that are seeing a price surge. Shipping costs are…