February 16, 2021
First, we talked about China executing from its post-financial crisis playbook, taking advantage of another global economic crisis, and depressed commodities prices, to hoard commodities.
Remember, the Trump administration flatly called the Chinese Communist Party "the greatest threat to everyone in the free world." The Biden administration calls the CCP just a cut-throat economic competitor. The news of the day supports the Trump position, over the Biden position. And it's clearly very important to be positioned correctly on this.
Next, we talked last week about the Biden "Clean Energy Revolution" plan on oil prices (and prices in general): Increased regulation, retrofitting, choking off funding to oil and gas, it's all part of the plan to "stop the worst consequences of climate change" (in the words of the administration). And they believe these worst consequences to be coming in "nine years." That's a very precise and aggressive timeline, which means radical change.
As we've said, we'll be using a lot of oil in the interim. And with funding for new exploration choked off, foreign oil producers will be in the driver’s seat, and they will command higher prices. Today, oil traded over $60. That's up 64% since election day.
Finally, we've been talking about inflation. While the Fed claims to ignore the influence of food and energy in their inflation measure, they have a history of acting when oil moves sharply (i.e. oil prices drive inflation). With that, the interest rate market is beginning to price in the consequences of, not just another massive deficit spending ("aid") package, but also rising oil prices.