Hoth

Incompetence and extreme hubris. 2018: Newly appointed Powell finally starts to raise rates and draw down the Fed's balance sheet after it recklessly kept rates historically low for years and years. Markets puke in Q4, Trump gets pissed, Powell capitulates and stops tightening. Market cheers, recovers and gets even bubblier in 2019. 2020: COVID. Market pukes bigtime, bubble really starts to pop. Powell/governments panic even harder, prints trillions out of thin air, creates unprecedented speculative mania. Late 2020: Inflation starts showing up, but Fed doesn't see it. Early 2021 Fed: Okay, we have some inflation, but we actually want inflation to run above target. Mid 2021 Fed: Okay, yeah, inflation's running hot, but it's "transitory." We'll keep printing and keep rates at zero. Late 2021 Fed: Shit, okay, maybe inflation isn't transitory. Time to talk like we're hawkish, but we won't do anything until March. Keep printing. Keep rates at zero. 2022: CPI at highest level in 40 years and climbing, stock/housing/bond bubble starting to pop and the Fed hasn't even begun hiking rates or reducing its balance sheet. Absolute clusterf*ck in progress. No good outcomes here. If Fed doesn't hike aggressively, inflation likely stays elevated, social stability may break down, and we get a recession with inflation. Yuck. If they do hike, say saiyonara to risk assets, house prices, bonds and say hello to recession. Strap on a helmet. It's gonna be ugly for a while. And that's without all the recent Ukraine stuff going down.

A storm that will live in infamy in my hood.

Actually snowing pretty hard now. Nice wintry feel with the wind.

A few flakes now as it winds down. Good wind though.

I found a poor little goldfinch huddled in the road this morning. It clearly has that disease that's been wiping out songbirds this year. Its eyes were pretty much gone. I didn't have the heart to leave it, so I brought it home and put it in a shoe box with some bedding and seeds. I figure it's a goner, but at least it can die warm and dry.

I’m not reading too much into day to day gyrations in the futures. After such a large upward move in a very short time, it is to be expected to see a pullback. That said, heading towards higher seasonal demand as we head to summer, I wouldn’t be surprised to see prices trend back up unless we see major deescalation in Europe. It’s going to take a while to get new capacity online too. Now, if we have another credit crisis or steep recession, then that’s another matter. It may be the only cure frankly.

Absolutely nothing sticking in downtown New Haven. What a depressing event.

Agreed.

Great storm. I could've sworn one of those lightning strikes hit in my neighborhood. Loudest thunder-snow I've ever heard.

The oil and gas industry has drastically cut capex and underinvested since 2014, in part owing to the rise of ESG funds making raising capital more difficult. On top of that, you have various political entities that have been trying to make it literally illegal for banks to lend to oil/gas producers. Add in more recent restrictions on new exploration leases and pipelines. Why wouldn’t oil execs just buy back their shares? This is not going to be an easy or quick fix (unless the economy collapses and takes oil with it).

I have authorized zee American Weather moderators to be on the highest nuclear alert.

It's so nice out. Let's keep this for the next three weeks.

At some point high energy prices will create real demand destruction, but nobody can say when that will transpire. Take 2008. The economy was already in deep recession and the banking system was imploding and oil was nearing $150. It eventually imploded into the $30s. Anyway, I wouldn't expect EVs to be some kind of haven. Charging rates are often based on electricity produced by natural gas or oil. And take a look at the commodity price trends for many EV components. Going vertical. Battery packs are going to get miiiiighty pricey.

All those bird calls I associate with spring are sounding this morning. I'm all in for an early spring this year, especially with oil ripping to $120+.

That sleet had some solid staying power though.

That's the conclusion I keep arriving at.

It has been a popular western delusion for a century that if we only figure out what's bothering some dictator or other, we can mollify them and there will be peace. The most notable analog would be Hitler. With the idea of renewed war anathema after WWI, Britain and France were perfectly willing to supplicate and appease the Germans. First, they let him ignore Versailles and rearm, then they let him militarize the Rhineland. Then, thinking that once he had reunited German-speaking peoples he would settle down, they looked the other way as he took the Sudetenland and moved on Czechoslovakia and Austria. It took Poland to be the final line in the sand that drew them in. Russia and the U.S. were pretty natural adversaries after the Bolsheviks took power. You could not have two more polar systems. Ours, based on guaranteed individual liberties, popular government, private property and a free market economy, clashes intensely with the Soviet communist model, little individual liberty, collectivization, no private property, total subservience to the State. Make no mistake that the USSR was every bit the Evil Empire, menacing not only the West, but also tens of millions of its own people. It's funny that you mention Putin being upset with us for not recognizing Russia's sacrifice in the war. I'm sure in Russian schools they neglect to mention that initially the USSR and the Nazis entered a non-aggression pact and agreed to divvy up eastern Europe between them, that is until Hitler unleashed his surprise eastern offensive. And staying in eastern Europe after the war ended certainly did nothing to soften western feelings, especially since the USSR's stated goal was to make the whole world communist. Ever since the collapse of the USSR, Russia has had but a shadow of its former influence or economic might. Its GDP is roughly half that of the state of California. It is quite important in a few areas, petroleum products, wheat, potash, ammonium nitrate, rare earth metals etc., but it is hardly an economic power of the first rank. Moreover, the wealth generated by these industries is in many cases controlled by a small number of individuals who fought and bribed and outright stole control of these industries after the USSR fell. Russia gets more respect than is owing chiefly due to its legacy nuclear arsenal, which it waves carelessly about like a kid that's found his dad's gun. That arsenal is serving as an umbrella to let Putin get away with things that might've otherwise brought about direct intervention. He has this perverse 19th century empire-building, or rebuilding, mindset and seems intent on reuniting all former Russian territories under his banner. This is wholly contrary to the international order presided over by the U.S. after WWII ended and a massive threat to peace globally. Putin is not rational and likely will only respect force, just like Hitler (who was frustrated that France and England weren't keen to fight at first). Hopefully intense sanctions will strangle his economy so much that some civic-minded Russian will pop him and earn the world's undying gratitude, but I wouldn't bet on it. I myself am preparing for the likelihood of considerable turmoil later in the year. Even if we somehow dodge a direct war with Russia, food prices will likely continue to skyrocket, crop yields may drop due to the loss of imported fertilizer supplies from Belarus, Russia and Ukraine and Phosphorus supplies get swallowed up by the Chinese. I wouldn't be surprised by a reprise of the Arab Spring, and considerable upheaval caused by inflation even in wealthy western nations. There was that joke circulating about 2022 being "2020 Too", and I can't thinking that may be apropos at this moment. Instead of pestilence, it may be war, financial upheaval, inflation and famine instead.

Yep, they have a curious infatuation with strong-man leaders, even when those leaders have historically gotten them slaughtered by the millions.

The foreign minister says a full meltdown of that plant would be equivalent to 10x Chernobyl.

I find that hard to believe frankly. I'd be interested in reading the book, but the USSR had both a viable space program (and hence rocket technology) and tested hundreds of nukes on their soil. Their tech wasn't up to U.S. standards, but I doubt it was that derelict.

Yeah, that's what I've read. I'm not sure they would tell us if it went higher though. They wouldn't want to spark a panic or telegraph anything to Russia.

I know as the alert level increases, the AF puts more and more bombers in the air. At DEFCON2, I believe those bombers carry nuclear payloads. I hope we're not there. It's only happened twice, once during October '62 and the Cuban Missile Crisis and once on 9/11.

We're at DEFCON 3 (maybe 2?), so there should be more AF equipment in the air.

Agreed. Putin clearly believes that his nuclear umbrella provides unlimited cover for him to do whatever he pleases. "Let me take over this country, and don't interfere or I nuke you" is the gist of it. Every time there's a conflict, he ratchets up the nuclear rhetoric. At some point, someone will call his bluff, and then we will find out whether it was in fact a bluff. I put nothing past him, but we cannot have rogue regimes terrorizing the world at will simply because they have nuclear weapons. More countries will either manufacture their own nuclear deterrent, or look to the nuclear powers to supply them. None of this is good, of course, but this is the way the world seems to be going.

Absolutely. They are definitely letting Russia test the waters. They may even sit back initially if we end up at war with Russia. Let us spill our guts in eastern Europe and then hit Taiwan when we don't have the will to stop them.