When Fed Chairman Jerome Powell began the talk of tapering the central bank’s asset purchases, the bond market didn’t skip a beat. There was no ‘taper tantrum’. Powell was clearly in control of the situation. As the central bank has continued to assure investors that they are in control, their narrative of transitory inflation has begun falling apart. This has all culminated with today’s announcement of the Fed’s asset purchase taper.
They have officially reduced their purchases by $10 billion in Treasury securities and $5 billion in mortgage-backed securities. This means the central bank goes from buying $120 billion in assets every month to $105 billion. Outside the ivory towers of the Fed and Wall Street, this reduction in asset purchases does nothing. This action will not temper the rampant inflation.
At the pace the central bank has outlined, the taper won’t finished until June of 2022. That is if they keep to the schedule. In addition, there was no talk of raising interest rates. This is the action that what would actually moderate inflation. In fact, in the Fed’s own press release, they believe that,
“Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation.
They believe reducing the supply constraints will reduce inflation, not raising interest rates! This is clown talk.
After the announcement the S&P500 shot up but bonds had the opposite reaction. TLT slid down a half percent. Gold remained unchanged from it’s morning drop. This is mixed messaging from traders.
What’s not a mixed message is uranium.
Nuclear is detonating! All uranium miners exploded higher today. Energy Fuels (UUUU) was the big winner of the day with Cameco (CCJ) close behind. This was on the heels of an announcement out of China. Bloomberg reports that China is planning on building at least 150 new reactors over the next 15 years. This is China’s big attempt at going green. They want to get their air quality cleaned up but they need to power their manufacturing sector. Chinese authorities believe that it’s plans to go nuclear could prevent 1.5 billion tons of annual carbon emissions. They estimate their effort could cost up to $440 billion. If China can stick to it’s schedule and build 150 new power plants, China will have built more nuclear power plants in 15 years than the rest of the world has built in the past 35 years.
Needless to say, nuclear is coming front and center in the battle for clean energy.
China is looking like an early adopter of the next phase in nuclear power generation. If you would have told me that China was going to lead the pack, I wouldn’t have believed you. Now that they’ve taken charge, things continue to look hot for the sector. Europe is battling to get nuclear deemed ‘green’ and Japan is looking to restart their nuclear programs. In addition, the US will not be far behind. If there are issues with keeping up with energy demand in the US during the winter, nuclear energy generation will be the only alternative to those that want ‘green’ energy. This will be much more palatable if Europe was to move the ball on deeming nuclear ‘green’ first.