Many countries are moving toward more renewable sources of energy. According to BP, in one of their more optimistic scenarios, renewable energy could supply almost half of the world’s energy by 2050. That is still a long way away, but long-term investors should start thinking about the potential winners and losers now. The losers in a shift to renewables are likely to be fossil fuels. What defines a loser? We are defining it here as a fuel that will lose market share. The biggest loser among fossil fuels is likely to be coal. Oil is also likely to see a significant loss of market … [Read more...]
About Jeremy Jones, CFA
Depositors in Europe Now Being Charged by Banks
In The Wall Street Journal, Patricia Kowsmann reports that depositors being charged by banks for their business are getting fed up. She writes: Interest rates have been negative in Europe for years. But it took the flood of savings unleashed in the pandemic for banks finally to charge depositors in earnest. Germany’s biggest lenders, Deutsche Bank AG DB -0.04% and Commerzbank AG CRZBY 0.05% , have told new customers since last year to pay a 0.5% annual rate to keep large sums of money with them. The banks say they can no longer absorb the negative interest rates the European Central Bank … [Read more...]
This Is When Things Get Interesting in Currency and Bond Markets
Today, the Australian Central Bank doubled the size of its daily bond purchases to hold down the rise in long-term Australian interest rates. The market says Australian rates are too low and need to rise. The central bank disagrees, but if the market ends up having the correct view of the exchange rate, look for the Australian dollar to start depreciating. The FT has more on Australia’s decision: Australia’s central bank doubled the size of its regular bond purchases on Monday in a move that analysts say will have broad implications as policymakers consider their response to a global jump in … [Read more...]
Democrats Have a Plan: Don’t Get Too Attached to Your Capital Gains
Democrats have found a way to put the Federal Reserve's reckless stimulus posture to use for them. They want to increase capital gains taxes to pay for their spending. Joseph C. Sternberg writes in The Wall Street Journal: A central Republican criticism of the $1.9 trillion Covid “stimulus” Democrats plan to ram through Capitol Hill is that taxes will have to rise eventually to pay back all the debt funding this spree. That’s more controversial than it ought to be—Democrats and their intellectual enablers seem certain money grows on trees—but it also elides an interesting question: Which … [Read more...]
Bubble in Tech Stocks Will Cause “Clean Out” in Markets
Jamie Smyth and Robin Wigglesworth report on Peter Costello's view that the bubble in tech stocks being inflated by the world's central banks could cause a market "clean out." They write in the Financial Times: The world’s big central banks are inflating a bubble in technology stocks that will lead to a “clean-out” on global equity markets, the chairman of Australia’s $135bn sovereign wealth fund has warned. Rock-bottom interest rates and bond-buying programmes put in place to cushion the impact of the pandemic last year have left economies and markets vulnerable to a shock, Peter Costello … [Read more...]
Time for the Fed To Stop Babying the Bond Market
At The Financial Times, Richard Bernstein suggests the Federal Reserve begin a tough-love campaign with the bond market. He writes: The Ferber Method, a sleep training technique, teaches babies to self-soothe and fall asleep on their own. It’s as much a training technique for new parents to ignore their baby’s crying as it is for the child to learn to cope by themself. The US Federal Reserve should consider Ferberising bond investors and ignore future “taper tantrums” like the market disruption that occurred when the central bank signalled tighter monetary policy in 2013. The long-term … [Read more...]
Herd Immunity by April?
COVID-19 may be entering its final days. According to one medical expert writing in the WSJ, the U.S may see herd immunity by April. Dr. Makary, a professor at the Johns Hopkins School of Medicine and Bloomberg School of Public Health, writes: Amid the dire Covid warnings, one crucial fact has been largely ignored: Cases are down 77% over the past six weeks. If a medication slashed cases by 77%, we’d call it a miracle pill. Why is the number of cases plummeting much faster than experts predicted? In large part because natural immunity from prior infection is far more common than can be … [Read more...]
Corporate Bond Yields: What You Can Earn Today
Corporate bonds are a good place to pick up yield in the bond market. With yields on government bonds in much of Europe and Japan in negative territory, corporate bonds offer a higher-yielding alternative. Corporate bonds are a broad universe, though. There are investment-grade corporate bonds, junk bonds, foreign corporate bonds, hybrid corporate bonds, and floating-rate corporate bonds among other variations. Investment-grade corporate bonds are the largest part of the corporate bond market. How Much Do Corporate Bonds Yield Today? We break the investment-grade corporate bond … [Read more...]
Is Oil Headed Back to $100 per Barrel?
With all the focus on green and renewable energy, one might think that the oil and gas business is finished. It’s possible demand will peak within the next couple of decades, but don’t forget it is supply and demand that set the price. Every year without additional investment, the world's oil supply falls by millions of barrels a day. Oil demand collapsed in 2020, but so did investment which will limit supply in the near-to-medium-term. Goldman Sachs and JP Morgan are forecasting a surge in oil prices. The FT reports: The most bullish forecast has international crude prices staging a … [Read more...]
Texas Needs More Coal, and More Nuclear
The winter weather hitting Texas this year has shown that the "transition" energy combination of renewables and gas has flaws. The Wall Street Journal writes: Texas has about 30,000 MW of wind capacity, but winds aren’t constant or predictable. Winds this past month have generated between about 600 and 22,500 MW. Regulators don’t count on wind to provide much more than 10% or so of the grid’s total capacity since they can’t command turbines to increase power like they can coal and gas plants. Wind turbines at times this month have generated more than half of the Texas power generation, … [Read more...]
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