Today, September 5, I’ve gone back through this Special Report to update any parts of my calendar in light of what we’ve learned about the economy, about Federal Reserve interest rate policy, and about the global economy in the last few weeks. This update includes my take on the August jobs report and on recent Fed-speak from the Jackson Hole conference and after. It is different this time. And it’s likely to “be different this time” for the next five years or so. And you need an investment strategy for that period.
OPEC+ is in crisis again–but since no one knows quite what the result is likely to be, we’ve had big swings in sentiment and prices in the oil market (and in banks, other commodities, and the inflation/deflation play) today
The Organization of Petroleum Exporting Countries and its affiliated oil producers (OPEC+) abandoned their Monday meeting after days of tense talks failed to result in an agreement on a tentative deal to increase production, and even over how to measure production. The disagreement between Saudi Arabia snd the United Arab Emirates was so heated that OPEC+ couldn’t even agree on a date for its next meeting. When these two countries last clashed in December 2020, the UAE talked of leaving OPEC. Oil prices initially jumped to its highest level in more than six years on news that OPEC+ had failed to agree to increase production. But prices then fell as traders speculated that the failure to reach an agreement on production increases would result in unplanned increases in production.
Researchers looking for a way to improve the tolerance of the Arabica coffee plant that accounts for 56% of global coffee production may have found their cuppa in Sierra Leone. Coffea stenophylla grows at a mean annual temperature up to 12.24 degrees higher than Arabica. And coffee tasters say, according to Bloomberg, it has a flavor similar to Arabica rather than to the more temperature tolerant Robusta coffee used now in instant and other bulk coffees. Global coffee production is threatened by rising temperatures
Before you get too excited by that headline, note that a 30% hike in the dividend at Wheaton Precious Metals (WPM) will bring the payout to just 13 cents for the first quarter of 2021. But that’s still, as my grandmother used to say, better than a poke in the eye with a sharp stick. At the least it’s a vote of confidence by the company’s board of directors that they see strong revenue and earnings growth in the year ahead. Wheaton Precious Metals doesn’t actually do any mining itself. Instead it purchases a stream of production from miners of precious metals and cobalt.
U.S. GDP growth slowed in the fourth quarter, gaining just 1% from the third quarter. For the full year the U.S. economy contracted by 3.5%. That makes 2020 the first time that the economy has contracted for a full year since 2009 and the Great Recession. At the bottom of that recession that economy contracted by 2.5%. 2020 is also the worst year for economic growth since 1946 when the economy shrank by 11.6% as the country demobilized after World War II. Consumer spending slowed in all 15 categories tracked by the Bureau of Economic Analysis. The sectors that had powered the recovery in the third quarter–restaurants and hotels, for instance–reversed. The growth in spending on cars and health car also slowed from the acceleration in the third quarter. So why is this good news as far as the stock market is concerned?
Does news that U.S. will let Russia’s big aluminum producer avoid sanctions remove this wild card from commodities and stock markets?
U.S. Treasury Secretary Steve Mnuchin said today that Russian metals giant Rusal, could get sanctions lifted if Putin-connected oligarch Oleg Deripaska relinquished control. The Treasury also gave Rusal a five month extension as it considered Rusal’s appeal of the sanctions. Commodity prices–especially aluminum–fell on the news.